Relocation expenses and HMRC: the £8,000 exemption, and the travel inside it

When an employee moves home for a new job or a new workplace, the employer can pay up to £8,000 of qualifying relocation costs without tax, National Insurance or reporting. The costs that qualify are set by the Income Tax (Earnings and Pensions) Act 2003 — selling and buying a home, removals, domestic goods, bridging loans, and a good deal of travel: house-hunting trips, temporary accommodation and the journey on moving day. The move itself has to meet three conditions, and the costs have to be incurred within a time limit.

Which relocation costs qualify

HMRC groups everything that qualifies into six categories: “disposal or intended disposal of old residence acquisition or intended acquisition of new residence transporting belongings travelling and subsistence domestic goods for the new residence bridging loans”. Anything outside them is not a qualifying cost, however closely connected with the move.

The limit

GOV.UK: “You do not have to report or deduct anything for qualifying costs up to £8,000.” Above the limit: “report on form P11D pay Class 1A National Insurance on the amount above £8,000”. An illustration of a move with the travel costs included:

Without the house-hunting trips and the temporary accommodation, the costs would be £8,700 — already £700 over the limit. The travel adds £4,150, and every pound of it is taxable. How the travel is booked is part of the tax cost of a move.

The three conditions for the move

Condition C rules out a move closer to an office the employee could already reach within a reasonable daily travelling distance, however long that commute felt.

The time limit

Costs must be incurred on or before the limitation day, which is “the last day of the tax year after that in which the employee begins to perform the duties of the employment after the employment change”. So an employee who starts in the new role in October 2026 has until 5 April 2028. The date can move: “An officer of Revenue and Customs may direct that the last day of a later tax year is the limitation day in relation to any particular change of residence if it appears to them reasonable to do so having regard to all the circumstances of that change.”

Relocation travel: what the Act lists

This is the part of a relocation that a travel supplier usually books. Section 281 covers, among other things:

• Visits to the new area: “subsistence and facilities for travel provided for the employee and members of the employee’s family or household for temporary visits to the new area for purposes connected with the change of residence”
• Moving day: “facilities provided for the employee and members of the employee’s family or household for travel from the employee’s former residence to the employee’s new residence in connection with the change of residence”
• Travel between the old home and the new workplace, or temporary living accommodation, while the move is in progress (s.281(1)(c)).
• Children kept at their school: HMRC’s guidance extends travel and subsistence to a child who stays behind or goes ahead for continuity of education, if the child is “under 19 at the beginning of the year of assessment in which the job move takes place”.

A sale that collapses does not remove the relief: “The expenses of a sale that falls through will still be expenses which qualify provided that the employee does still change his or her residence.”

Costs that do not qualify

Anything outside the six categories is non-qualifying, and how it is taxed depends on how it is paid:

• Arranged and paid directly by the employer: “Non-qualifying benefits that you arrange and pay the supplier directly You must: report on form P11D pay Class 1A National Insurance on the cost to you”.
• Reimbursed to the employee: “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”.

A flat “relocation allowance” paid regardless of the actual costs is not tied to qualifying costs, so it falls into the second category and is earnings.

A relocation policy in five lines

• Confirm the three s.273 conditions before offering relocation support.
• Pay against receipts for qualifying costs, not a flat allowance.
• Track the running total against £8,000, including travel and temporary accommodation.
• Diary the limitation day.
• Report the excess, and any non-qualifying costs, as the guidance requires.

How other expenses reach or avoid the P11D is on P11D and business travel. The rules for ordinary business travel and temporary workplaces are on travel expenses and tax. This page reproduces legislation and HMRC guidance as read on 2026-09-26; it is not tax advice.

Common questions