Allowances and expenses paid to you
In addition to your regular pay the armed forces also pay some of the costs you incur as a result of doing your job. The armed forces do this by either
- paying you a cash allowance;
- reimbursing you for the expenses if you have paid for these yourself; or
- paying the cost directly to the supplier of the services or the goods.
All the allowances and expenses that you might be entitled to receive are set out in a Ministry of Defence document JSP 752 called “Tri-Service Regulations for Expenses and Allowances”. You will find a copy of it on the Defence intranet or on GOV.UK.
You may also receive various non-cash employment benefits, for example accommodation for you and your family and the costs of the utilities due in respect of this accommodation. The provision of Service Family accommodation is set out in the Ministry of Defence document JSP 464 “Tri-Service Accommodation Regulations”. Again you will find a copy of it on the Defence intranet or on GOV.UK.
Do I have to pay tax and NIC on allowances or expenses?
Some of the allowances and expenses that you will receive from the armed forces are specifically exempt from tax and National Insurance (NIC). This is either by law or because of special agreements between HM Revenue & Customs (HMRC) and the armed forces.
In other cases, where there is a tax and/or NIC liability, the armed forces have decided that they should pay this on your behalf. The armed forces pay this tax/NIC directly to HMRC at the end of each tax year.
There are a few allowances where you do have to pay the tax/NIC yourself. You can find out more about these and how you pay the tax/NIC below.
Which allowances am I responsible for paying the tax and NIC on and how does this happen?
You can find an alphabetical list of these allowances on our website.
As you will see from the table the usual way that you pay the tax and NIC due on these allowances is through the Pay As You Earn (PAYE) system. The allowance is included in your payslip in the same way that your basic pay is and tax and NIC is automatically calculated and deducted. You can find out more about your payslip by reading our separate section on your JPAC payslip.
If you have received a loan from the armed forces to help you buy a property for you and your family to live in you do not have to pay interest on this loan. If this loan together with any other loans or advances that you receive from the armed forces is more than £10,000 a taxable benefit arises. JPAC calculate the benefit at the end of each tax year using HMRC’s official rate of interest for beneficial loan arrangements and report the amount to HMRC.
As an example, assume that for the whole of the tax year you have a Long Service Advance of Pay/Forces Help to Buy (LSAP/FHTB) of £25,000 and no other loans or advances. HMRC’s official rate of interest for the tax year is 3.00%. The value of the benefit is £25,000 x 3.00% which is £750. This is not the amount of tax you owe. This benefit, £750, is non-cash income and how much tax you will have to pay depends on your highest tax rate. If your highest tax rate is 20% you will pay tax of £750 x 20% which is £150. You do not have to pay NIC on the benefit.
HMRC will collect the tax in various ways:
- If you submit a self assessment tax return you will need to include the benefit in it, and the tax due will form part of your self assessment tax payment.
- If you don’t submit a self assessment tax return HMRC will include the interest benefit as part of your income when they prepare your P800 reconciliation. HMRC will either ask you to pay any tax due then or include the underpayment in a future year’s PAYE code.
You can find out the official rate of interest on the GOV.UK website.
Which are the allowances or expenses that I don’t have to pay the tax and NIC on?
You can find an alphabetical list of these allowances on our website.
Some of the allowances or expenses included on this list are only taxable in certain circumstances. One example of this is travel by your family because of your duties in the armed forces; family travel in the UK is normally taxable and in most cases the armed forces pay the tax but family travel outside the UK is specifically exempted. This is why some of the allowances or expenses in the list have a tick in both columns.
You might receive some of these allowances or expenses as cash. This will be because either:
- the allowance is paid in cash, for example the motor mileage allowance (MMA); or
- you have paid a third party directly and the armed forces are reimbursing you the amount.
In these circumstances you will see the amount you received on your payslip. However, it should not be included in the “Taxable PAY Paid To Date (PTD)” and/or “NIable PAY PTD” figures on your payslip. To find out more about your payslip you can read our separate section on your JPAC payslip.
How do I claim the costs of laundering my uniform?
HM Revenue & Customs came to an agreement with the Ministry of Defence that covered all tax years up to and including 2013/14 for ratings and other ranks. If you were employed by the Ministry of Defence at March 2014, any refund due with regard to the Flat Rate Expense Allowance (FREA) was made to you through payroll. Since then the allowance has been given through your payroll and the only claim you need to make is if you want to claim for costs in excess of the standard allowance (Royal Navy £80; others £100). If you wish to make such a claim you will need proof of the costs and then make a claim using form P87. There is an example showing how to complete form P87 in our ‘forms’ section.
Some of the people I work with are getting refunds of tax directly from HMRC because of travel; how can I get a refund?
If you use your own car for business travel the armed forces will reimburse you at the MMA rate. This MMA rate is lower than HMRC’s approved mileage allowance payment (AMAP) rate. You can claim tax relief on the difference between the AMAP rate and the MMA rate from HMRC. You can find out how to make a claim in the ‘employed section’ of our website.
You might also be able to make a claim if you receive MMA payments in respect of home to duty travel (HDT) or get you home travel (GYH(T)). Both HDT and GYH(T) are always paid on a tax free basis because of the special circumstances of armed forces service; an employee of any other enterprise wouldn’t be able to be paid or reimbursed for similar travel on a tax free basis.
If you are working at a temporary workplace as defined by HMRC, you might be able to make a claim for tax relief as outlined above. HMRC became aware that there were some companies offering to help, for a fee, service personnel to claim this relief and some of the claims were not valid. After consultation between HMRC and the Ministry of Defence (MOD) a Defence Instructions and Notices (DIN) was issued outlining the circumstances in which the relief can be claimed. You should be able to find this DIN on the Armed Forces Intranet and there is a summary on the Royal Airforce Community Support website. A claim might also be possible if you are using public transport and the armed forces are not reimbursing you for these costs.
It is important that you ensure that any claim you make is valid. HMRC will process the claim, without checking it, and send you a refund. They will then check the claim later on and, if they believe your claim is not valid, they will send you a demand to repay the refund back to them. If your claim is not in accordance with the conditions outlined in the DIN you will have to pay the refund back.