Expenses and benefits: relocation costs

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1. Overview

You have certain tax, National Insurance and reporting obligations if you contribute to an employee’s relocation costs as their employer.

Relocation costs can include:

  • buying or selling a home
  • moving
  • buying certain things for a new home
  • bridging loans
  • other relocation expenses (these are counted as ‘non-qualifying’ costs and have different rules)

2. What you do not have to report

Some relocation costs up to £8,000 are exempt from reporting and paying tax and National Insurance. These are called ‘qualifying’ costs and include:

  • the costs of buying or selling a home
  • moving costs
  • buying certain things for a new home
  • bridging loans

These are only qualifying costs when:

  • a new employee is moving area to start a job with you
  • an existing employee is changing their place of work within your organisation
  • the employee’s new home is reasonably close to the workplace and their old home is not
  • the costs are paid before the end of the tax year that’s after the one in which the employee started their job

For qualifying costs over £8,000, you may have to report and pay tax and National Insurance.

Bridging loans

For a bridging loan to count as a qualifying cost:

  • your employee (or members of their family) must sell their old home and buy a new one
  • it must be needed to bridge the gap between buying the new house and getting the money from their sale of the old one
  • it must be used only to buy the new house or pay off loans relating to the old home
  • it cannot be for more than the market value of the old home at the time the new home is bought

3. What to report and pay

You do not have to report or deduct anything for qualifying costs up to £8,000.

Qualifying costs over £8,000

You must:

Non-qualifying benefits that you arrange and pay the supplier directly

You must:

Non-qualifying benefits that your employee arranges, but you pay the supplier directly

You must:

  • report on form P11D
  • add the cost to the employee’s other earnings and deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll

Non-qualifying expenses or benefits where you reimburse your employee’s costs

Non-qualifying expenses or benefits where you pay your employee back their costs count as earnings, so you must:

  • add them to the employee’s other earnings
  • deduct and pay PAYE tax and Class 1 National Insurance through payroll

4. Work out the value

For qualifying costs the value is any amount above £8,000.

For all other costs calculate tax or National Insurance using the full cost of providing the benefit.

Use HM Revenue and Customs (HMRC) P11D working sheet if you need help working out the cash equivalent of relocation benefits.

5. Technical guidance

HM Revenue and Customs (HMRC) have more detailed guidance on: