In this section:
- Tax codes - the basics
- Understanding your PAYE Coding Notice
- Emergency tax codes
- Company benefits in your tax code
- Expense payments in your tax code
- Pensions, state benefits and your tax code
- Other income taxed through your tax code
- How underpayments of tax affect your tax code
- If you have more than one tax code
- What to do if your tax code is wrong
Expense payments in your tax code
If you're reimbursed for expenses you incurred as part of your job you'll have to pay tax on the payments. We'll usually include the expense payment in your tax code and collect any tax due through PAYE (Pay As You Earn). You may get tax relief on these expenses - these will also show in your tax code.
On this page:
- Expense payments and tax relief
- Expenses entries on your PAYE Coding Notice
- Expense payments and tax relief - example
- More useful links
Expense payments and tax relief
If your employer has reimbursed you for expenses you incurred in carrying out your job - such as the cost of professional subscriptions or the use of your home telephone - you will have to pay tax on the payments you have received. However, you may also be able to get tax relief for your expenses - this has the effect of cancelling out the tax you are due to pay.
Both the expense payments and any tax relief you're due will show on your PAYE Coding Notice - as described below.
Expenses entries on your PAYE Coding Notice
Expense payments
The expense payments appear in the section on your PAYE Coding Notice called 'Items that reduce your tax-free amount' - under the headings 'Taxable expenses payments' and 'Telephone'.
Tax relief on expenses
Any tax relief you get on expense payments will show in the area called 'Allowances and reliefs'. Typical entries might include:
- 'flat rate job expenses'
- 'job expenses'
- 'professional subscriptions'
Expense payments and tax relief - example
You've paid professional subscriptions of £210 to an approved organisation. You have to belong to this organisation for your job so your employer reimburses you the money:
- your total allowances and reliefs are £6,685 - made up of your Personal Allowance of £6,475 (the amount for the 2009-10 tax year) plus tax relief of £210 for your 'professional subscriptions'
- your total 'deductions' (amounts which reduce your tax-free pay because they count as taxable income) are £210 - made up of your 'Taxable expenses payment' which is the amount your employer has reimbursed you for your professional subscriptions
- your total tax-free amount is £6,475 - the same as it would have been if you hadn't had the expense payments in the first place
So, you have tax-free income of £6,475 and your tax code is 647L.
Find out more about tax relief for expenses for employees
Understand more about the entries on your PAYE Coding Notice
Check Income Tax rates and allowances
More useful links
Find out about company benefits in your tax code
