How is the value of the removal benefits exemption calculated for the £8,000 cap?

The value is calculated by adding together three components: general earnings such as direct cash payments, benefits code earnings covering non-cash benefits but excluding taxable loans, and Part 7A employment income received through third-party arrangements. Safeguards prevent double counting between general earnings and benefits code earnings categories.

How is living accommodation valued for the purposes of the £8,000 removal benefits cap?

Where living accommodation is provided as part of a relocation package, its value is calculated by taking the cash equivalent of the accommodation for the period provided and subtracting any allowable deductions for payments made by the employee, such as rent. The resulting net figure counts towards the £8,000 limit.

Do removal benefits provided through third parties count towards the £8,000 exemption limit?

Yes, Part 7A employment income, which covers situations where removal-related benefits are provided to the employee through third-party arrangements rather than directly by the employer, is counted towards the £8,000 cap in the same way as direct earnings and benefits provided by the employer.

Income Tax (Earnings and Pensions) Act 2003 section 287

Q: What is the maximum amount of removal benefits and expenses that can be exempted from income tax under section 287?

Section 287 of the Income Tax (Earnings and Pensions) Act 2003 imposes a cap of £8,000 on the total value of removal benefits and expenses that can be exempted from income tax when an employee changes residence in connection with their employment. Any amount exceeding this limit is subject to income tax in the normal way.

Limit on exemption

Section 287 sets a cap of £8,000 on the total value of removal benefits and expenses that can be exempted from income tax when an employee changes residence in connection with their employment.

The total exemption for removal benefits and expenses related to a change of residence is capped at £8,000; any amount above this limit is taxable.
The value of the exemption is calculated by adding together three components: general earnings, benefits code earnings (excluding taxable loans), and Part 7A employment income received through third parties.
Where living accommodation is provided as part of the relocation, its value for the purposes of this cap is calculated as the cash equivalent of the accommodation minus any allowable deductions for payments made by the employee.
The rules include safeguards against double counting, so that any amount already included as general earnings is not also counted again as benefits code earnings.

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