What expenses are taxable?

Under general taxation law, some but not all expenses payments paid by an employer are taxable. It is often difficult to know which expenses are taxable, so we provide only a broad outline here.

Most expenses paid for costs necessarily incurred during the course of employment will not be taxable, although if your employer reimburses more than the actual cost you will be liable to tax. The types of expenses payments made to employees that are taxable include those in connection with:

  • travelling;
  • mileage allowances;
  • entertainment;
  • company credit cards; and
  • relocation of home (e.g. at the request of the employer or on starting a new job).

The rules were simplified from April 2016, so that business expenses, particularly travel and accommodation expenses up to a certain level (an 'approved amount'), are tax exempt.

For instance, if you have to move to take up a new job or are transferred by your employer, the first £8,000 of relocation expenses paid for reasonable removal costs will be exempt from tax.

Mileage allowances, paid in return for the use of your own car during the course of your employment, may only be taxable if paid above a specified mileage or rate per mile (in 2016-17, the limit was 45p per mile for the first 10,000 miles and 25p per mile after that).

There are special rules for employer-supported childcare.

For more detailed information about expenses, see the GOV.UK website or Employment benefits and expenses section of the Low Incomes Tax Reform Group website.

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.

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