How are Relocation Expenses Tax?

What is relocation expenses tax in the UK? Relocating within the UK is a costly experience and this is why it is quite draining for many people. The expected expenses include storage, food, accommodation, and transportation.

Relocating comes with a lot of changes in being taxed for the employees as well as the employers. So be very mindful about making choices in this regard. This will help to reduce the tax burden and minimise the stress of expenses.

In case you are moving across the country or to someplace nearby, this discussion will help you. This is to understand the benefits, handling the expenses and choosing the right place for you.

The UK tax system is already complex to deal with, while relocating this should be the minimum stress. In this discussion, we will talk about the taxation and expenses of relocation in the UK. This will allow you to navigate the financial challenges better in this scenario. So let us get started!

What are Relocation Expenses?

Moving expenses is a simple term used for relocation expenses in the UK. This includes the cost of moving from one place to another, city to city, or even a new country for work.

The types of relocation expenses can include the following:

• Transportation Costs: fuel, tolls, parking, and travel expenses for moving vehicles or hiring a removal company
• Accommodation Costs: temporary housing, hotel stays, or rental expenses while settling into a new area
• Food and Subsistence: meal allowances or expenses for food and drink during the relocation process
• Removal and Storage Costs: fees for hiring a removal company, storing belongings, or purchasing packing materials
• Travel Expenses: costs associated with travelling to the new location, including flights, trains, or other transportation
• Other Expenses: costs related to setting up a new home, such as utility deposits, furniture, or appliances

Moreover, the reasons for the relocation can include the following

• Starting a new job or transferring to a different location within the same company
• Moving to a new area for work-related training or education
• Relocating due to a partner’s job or other family reasons

How are Relocation Expenses Taxed?

There are several tax reliefs available in the UK for relocation expenses. This is for the reason of moving because of work. In simple words, we can say that the employees as well as the employers are in a position to claim the expenses incurred while moving to another place for work.

However, there are qualifying conditions regarding this matter in the UK. The possible conditions in this regard include the following

• Distance: The new workplace must be at least 50 miles further from the individual’s old home than their old workplace.
• Employment Requirements: The relocation must be required by the employer or necessary for the individual to perform their job.
• Time Limits: The relocation expenses must be incurred within a reasonable period (usually 1-2 years) of starting the new job.

Moreover, the  tax relief is available for the following reasons

• Genuine Removal Expenses: costs directly related to moving, such as transportation and storage
• Temporary Accommodation: costs associated with temporary housing, like hotel stays or rental expenses
• Travel Expenses: costs related to travelling to the new location

What are Taxable and Non-Taxable Relocation Expenses?

Here is an explanation of taxable and non-taxable relocation expenses in the UK.

Taxable Relocation Expenses

Some renovation expenses are taxed in the UK. This means that such expenses are obliged with the conditions of income tax and national insurance contribution. These are listed below

• Subsistence Costs: meal allowances or expenses for food and drink during the relocation process
• Travel Expenses: costs related to travelling to the new location, including flights, trains, or other transportation (unless reimbursed by the employer)
• Temporary Accommodation: costs associated with temporary housing, such as hotel stays or rental expenses (unless reimbursed by the employer)
• Mortgage Interest: interest on a mortgage for a new home (unless eligible for tax relief)

Non-Taxable Relocation Expenses

And then come the non-taxable relocation expenses. In simple words, we can say that they are exempt from the obligations of income tax and national insurance contributions. These are listed below

• Genuine Removal Expenses: costs directly related to moving, such as transportation and storage
• Reimbursed Expenses: expenses reimbursed by the employer, such as travel costs or temporary accommodation
• Relocation Allowances: lump-sum payments made by the employer to help with relocation costs
• Stamp Duty Land Tax (SDLT) Relief: relief from SDLT on the purchase of a new home (subject to conditions)

The Bottom Line

In conclusion, people find it daunting and overwhelming to talk about relocation expenses tax and how are they taxable or non-taxable in the UK. However, the whole process will be a little easier if you understand the tax implications regardless of whether you are an employee or an employer.

Also, the tax laws in the UK keep being updated, so be informed to make the right choices and avoid any delays.

Disclaimer: The information about How are Relocation Expenses Tax? provided in this article including text and graphics. It does not intend to disregard any of the professional advice.