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Relocation Expenses and Allowances

If you're employing someone who needs to move house for their job, you can help them with relocation costs in a tax-efficient way. HMRC allows employers to pay or reimburse up to £8,000 of qualifying relocation expenses without creating a tax or National Insurance liability fo...

Introduction

What is the £8,000 exemption?

When an employee moves home because of their work, their employer can pay or reimburse up to £8,000 of qualifying removal expenses and benefits tax-free. This means:

The employee pays no Income Tax on the payment
Neither employer nor employee pays National Insurance contributions on it
The employer doesn't need to report it on form P11D

Any amount above £8,000 is treated as taxable pay and must go through payroll in the normal way.

When does relocation relief apply?

The relief applies when an employee changes their residence as a result of starting a new job or being transferred to a different work location. The move must be necessary for the employment, not simply convenient.

The old residence must be beyond a reasonable daily travelling distance from the new workplace, or the move must result in the new home being within a reasonable daily travelling distance when the old home was not.

What expenses qualify for the £8,000 exemption?

HMRC groups qualifying relocation expenses into six categories. Each expense must be reasonable in relation to the relocation.

Disposal of the old residence

If the employee is selling their old home (or ending a tenancy), you can cover:

Legal fees connected with the sale
Legal fees for redeeming mortgages or loans on the property
Early redemption penalties on mortgages
Estate agent's or auctioneer's fees
Advertising costs for the sale
Disconnection charges for electricity, gas, water, or phone services

If the property is left empty while waiting for a sale, you can also cover:

Rent paid during the empty period
Insurance
Maintenance
Security costs

Note that Council Tax on an empty property cannot be covered tax-free.

The property can be owned by the employee, the employee and family members together, or family members alone. Relief also applies if a planned sale falls through, provided the employee does ultimately relocate.

Acquisition of the new residence

For buying or renting a new home, qualifying costs include:

Legal fees for the purchase
Legal fees for arranging a mortgage
Mortgage arrangement or procurement fees
Mortgage indemnity premiums
Survey or inspection fees
Land Registry fees (in England, Wales, Scotland, or Northern Ireland)
Stamp Duty
Connection charges for utilities and phone services

As with disposal costs, relief applies even if a planned purchase doesn't complete, either due to circumstances beyond the employee's control or because they reasonably decide not to proceed.

Transporting belongings

You can cover the cost of moving the employee's household possessions and those of their family, including:

Packing and unpacking
Insurance during transit
Temporary storage if needed between the old and new home
Removing domestic fittings from the old property and reinstalling them in the new one

Travel and subsistence

Qualifying travel and subsistence (food, drink, and temporary accommodation) for the employee includes:

Preliminary visits to the new area to view properties
Travel between the old home and new workplace (or vice versa if the house move happens before starting the new role)
Travel to temporary accommodation while searching for or waiting to move into permanent housing
Travel costs on the day of the move itself

Family members can also have tax-free travel and subsistence for:

Preliminary visits to the new location
The journey from old home to new home on moving day

Special rules apply if a child (under 19 at the start of the tax year in which the move happens) stays behind at the old location or goes ahead to the new one to maintain continuity of education. In these cases, you can cover their subsistence costs and travel between the old or new home and where they're staying.

Temporary living accommodation

If an employee needs to stay in a hotel or rent temporary accommodation while waiting to sell their old home or complete on a new one, this counts as qualifying temporary living accommodation. The cost of such accommodation and related subsistence can be covered tax-free within the £8,000 limit.

The benefit is measured as the actual cost to the employer. If the accommodation would normally be taxable as living accommodation under employment benefit rules, use that taxable value instead.

Domestic goods for the new residence

You can provide or reimburse the cost of replacement domestic items needed for the new home. This might include curtains, carpets, or white goods that don't fit or aren't suitable for the new property.

Bridging loans

The cost of bridging loan arrangements can qualify for relief. These are short-term loans taken out when an employee needs to complete the purchase of a new home before the sale of their old home is finalised.

What doesn't qualify?

Remember that the £8,000 exemption doesn't cover everything. Expenses that fall outside the six qualifying categories cannot be paid tax-free, even if they're related to the move.

Council Tax on an empty property waiting to be sold is specifically excluded from relief.

International relocations

Different rules may apply for international moves. If a foreign national comes to the UK for employment, their travel costs (and those of their spouse and family) may qualify for separate tax relief. Similarly, UK residents going abroad to work may have travel costs covered under different provisions. In these cases, employees can receive both the travel cost relief and the £8,000 relocation exemption.

Practical points for employers

To make use of this relief:

Keep clear records of all relocation expenses paid, showing they fall within qualifying categories
Ensure expenses are reasonable and directly related to the relocation
Monitor the £8,000 limit carefully for each employee — it applies per relocation, not per tax year
Any amount over £8,000 must be processed through payroll as taxable pay

The relief applies to benefits in kind as well as direct payments, so you can provide services (such as paying an estate agent directly) rather than reimbursing the employee.

Sources

Relocation expenses (480: Appendix 7)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.

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