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. HM Revenue & Customs (HMRC) will 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.

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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.

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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'

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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 £9,650 - made up of your Personal Allowance of £9,440 (the amount for the 2013-14 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 £9,440 - the same as it would have been if you hadn't had the expense payments and tax relief in the first place

So, you have tax-free income of £9,440 and your tax code is 944L.

Find out more about tax relief for expenses for employees

Understand more about the entries on your PAYE Coding Notice

Check Income Tax allowances and rates for tax year 2013-14

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More useful links

Find out about company benefits in your tax code

What to do if you think your tax code is wrong

Learn more about tax codes

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