Location, location, relocation

Recent research indicates that the cost of moving house now averages out at over £5,000. Not surprisingly this can act as a deterrent to moving but what if you have no choice? Perhaps you are starting a new job or your employer wants you to work in Plymouth when you previously worked in Manchester.

In such circumstances an employer can pay an employee up to £8,000 in relocation expenses free of income tax and national insurance (NI) but only if certain conditions are satisfied. Otherwise reimbursed relocation costs will be taxable and liable to NI and need to be reported on the employee’s P11D.

Broadly the following categories of expense are covered by the exemption:

Sounds simple! But as with all tax rules there are complications. We address some of these in this article so that if you are an employer reimbursing relocation expenses or an employee in receipt of them you are in with a fighting chance of benefiting from the exemption.

An employee will only be entitled to tax relief if the main residence has changed as a result of the job change. This doesn’t mean that the old residence needs to be sold BUT the new residence must be within reasonable daily travelling distance of the new place of work and the old residence must not. Needless to say ‘reasonable travelling distance’ is not defined and the only help the Revenue can offer is that ‘you should apply common sense and take account of local conditions’. Thanks!

An example may help.

Tim is offered a relocation by his employer from Manchester to Cambridge. He buys a house in Lincoln and commutes two hours each day each way from Lincoln to Cambridge. His reimbursed relocation expenses will be taxable since Lincoln is not, in the Revenue’s view, ‘within reasonable travelling distance’ of Cambridge.

What if Tim buys a flat in Cambridge but retains his house in Manchester? He only uses the Cambridge flat as somewhere to live during the week returning to Manchester at weekends and sometimes during the week. Once again there has not been a qualifying relocation and any expenses paid are taxable and liable to NI.

The situation can be even more complicated if Tim has a family and they split their time between Manchester and Cambridge……talk to us if you are faced with a similar situation…..before rather than after the event.


Sometimes a relocation involves a relocation company. What is the tax treatment of the management fees they charge? It depends.

Again we use an example.

Angela is reimbursed qualifying (ie exempt) relocation expenses of £7,000. In addition a relocation company charges a fee of £1,000. This takes the total up to £8,000 and so is exempt. If the company had charged, say, £1,200 then £1,000 would have been exempt being within the £8,000 limit and the balance of £200 taxable.

The management fee will need to be pro-rated where only some of the expenses are exempt.


The £8,000 exemption can be used to cover the provision of a car for the purposes of relocating.

Andy has been relocated and will be moving house in a few months time. In the meantime his employer gives him a ‘spare’ company car to commute from his old home to his new place of work. The taxable benefit arising can be covered by the £8,000 exemption so long as the car is not available to Andy for any other private use apart from the travel relating to his relocation. If there is any other private use, the benefit will be taxable in full applying the normal car benefit rules.


As you can see the rules have the potential to be something of a minefield. It is worth making sure you get it right. Please talk to us if you have any questions.