Ever had to move house because of your job? Whether you’re in the Armed Forces, construction, offshore work or the public sector, you may have come across something called a disturbance allowance. It’s designed to help cover the costs and hassle of relocating. But here’s the big question: is a disturbance allowance taxable?

The answer isn’t always straightforward. Some payments are tax-free, while others could land you with a tax bill if you’re not careful. Understanding the rules can save you money, and that’s where RIFT Refunds comes in.

What is a disturbance allowance?

A disturbance allowance is a payment made to help cover the costs of moving home for work. It’s often used in situations like:

The allowance is meant to offset expenses such as:

  • Packing and moving
  • Mail redirection
  • Installing appliances
  • Temporary accommodation

Whether this payment is taxable depends on a number of things, which we’ll get to shortly.

Types of disturbance allowances

Disturbance allowances can vary a lot depending on your job, employer, and reason for moving. Let’s break down the most common types and how tax rules apply to each.

Workplace relocation disturbance payments

When your employer requires you to move for work, you might receive a disturbance allowance to cover relocation costs. HMRC allows up to £8,000 in qualifying expenses to be exempt from tax and National Insurance, provided certain conditions are met.

Armed Forces disturbance allowances

Military personnel often receive disturbance expenses when moving to a new duty station. These payments are typically made in advance and vary based on accommodation type and location. For example, as of April 2024:

  • UK single living accommodation: £103
  • UK service families accommodation: £1,041
  • Overseas single living accommodation: £371
  • Overseas service families accommodation: £1,882
  • Child element (per eligible child): £109.41

Military tax refunds

These allowances are generally tax-free when they meet specific criteria.

Construction and offshore industry disturbance payments

In industries like construction and offshore work, disturbance allowances may be provided for temporary relocations. The tax treatment of these payments depends on things like the duration of the assignment and whether the workplace is considered temporary.

Construction tax refunds

 

Offshore tax refunds

 

Temporary accommodation and subsistence allowances

Sometimes, employers cover costs for temporary accommodation and subsistence during relocations. These payments can be tax-free if they meet HMRC’s conditions for qualifying expenses.

Workplace relocation disturbance payments

When you’re required to move for work, certain relocation expenses can be exempt from tax and National Insurance, up to a limit of £8,000. To qualify:

  • The move must be necessary for your job
  • The new home should be reasonably close to your new workplace
  • Expenses must be incurred before the end of the tax year following the one in which the move occurred

Qualifying expenses include:

  • Buying or selling a home
  • Moving costs
  • Buying certain items for the new home
  • Bridging loans

Any amount over £8,000, or expenses that don’t meet these criteria, may be taxable.

Military disturbance allowances

For Armed Forces personnel, disturbance expenses are provided to cover costs associated with moving to a new duty station. These payments are typically tax-free, as long as they meet specific conditions set out in JSP 752 – the official Joint Service Publication that lays down the rules for all UK military expenses and allowances.

JSP 752 acts as the Armed Forces’ handbook for entitlements, including relocation and disturbance allowances. It explains who qualifies for what, how much they can claim, and under what circumstances the payments are exempt from tax. If a payment follows the rules in JSP 752, it usually won’t be treated as taxable income.

Additional allowances, such as the Continuity of Education Allowance (CEA), may also be available to assist with children’s education during relocations. And for moves involving overseas postings or operational deployments, there are separate provisions to support the unique challenges service families face.

Rules for claiming military tax refunds


General tax principles for disturbance payments

HMRC assesses the taxability of disturbance payments based on several principles:

Wholly, exclusively and necessarily

Expenses must be incurred wholly, exclusively and necessarily in the performance of your duties to be tax-deductible.

Temporary vs. permanent workplace

Assignments lasting less than 24 months are generally considered temporary, affecting the tax treatment of related expenses.

More on temporary workplace distance rules

The 24-month rule

If you’re at a temporary workplace for more than 24 months, it may be deemed permanent, impacting tax relief eligibility.

Reimbursement vs. allowance

Reimbursed expenses are typically tax-free, while flat-rate allowances may be taxable unless they meet specific criteria.

Taxable components of disturbance allowances

Certain disturbance payments are considered taxable:

  • Flat-rate allowances: If not directly linked to actual expenses, these may be treated as additional salary and taxed accordingly.
  • Excess payments: Amounts exceeding HMRC’s tax-free limits are subject to tax and National Insurance.
  • Non-qualifying expenses: Costs that don't meet HMRC’s criteria for tax-free treatment are taxable.

Employers must report taxable disturbance payments through PAYE, and you may see adjustments in your tax code as an employee.

Tax-exempt components of disturbance allowances

Some disturbance payments are exempt from tax:

  • Qualifying relocation expenses: Up to £8,000 of eligible costs can be tax-free.
  • Travel and subsistence: Expenses for temporary workplace assignments may be exempt if they meet HMRC’s conditions.
  • Exceptional circumstances: In certain cases, additional tax relief may be available for unique situations.

Having the correct documentation and adhering to HMRC guidelines are vital in order to ensure these payments remain tax-free.

Record-keeping for disturbance allowances

Keeping accurate records is an essential part of disturbance allowances, especially if you’re claiming tax relief or relying on an exemption. You’ll need to hang onto receipts, invoices, and any documents that prove what you spent and why.

This includes everything from moving company bills to rent agreements for temporary accommodation. It’s also important to keep hold of any paperwork or forms your employer gives you about the allowance, as this helps show HMRC that the payment was legitimate and in line with the rules.

As an employer, you need to clearly document what you’re paying and why. If you’re an employee, you should make sure you’ve got the evidence to back it all up. Don’t wait until you’re asked. Get into the habit of storing your records as you go.

Remember, HMRC expects you to keep supporting evidence for several years, so don’t be too quick to clear out those files. Getting this part right could be the difference between a stress-free refund and a tax headache later on.

Claiming tax relief on taxable disturbance payments

If you’ve received taxable disturbance payments, you may be eligible to claim tax relief:

  • Self-assessment: Include the relevant expenses in your tax return.
  • Forms and deadlines: Use the appropriate HMRC forms and meet submission deadlines.
  • Calculating relief: Determine the portion of the allowance that qualifies for relief based on actual expenses incurred.
  • Professional fees: Fees paid to professional bodies or for subscriptions related to your work may also be deductible.

Consulting with a tax professional like RIFT can help ensure you claim the maximum relief available and see every penny you’re owed land in your bank account.

Meet the RIFT team


Industry-specific considerations

Every industry has its own conditions when it comes to relocation. Here’s a look at how disturbance allowances are handled across key sectors.

Construction industry

Workers often receive disturbance allowances for temporary site assignments. Tax treatment depends on things like assignment duration and whether the site is considered a temporary workplace.

Oil and gas industry

Offshore workers may receive allowances for travel and accommodation. These payments can be tax-free if they meet HMRC’s criteria.

Emergency services and healthcare sector

Relocation allowances are common for staff moving to new postings. Tax implications vary based on the nature of the move and the expenses covered.

Public sector relocation schemes

Government employees may receive disturbance allowances when transferred. Policies differ across departments, so it’s essential to understand the specific rules applicable to your situation.

Get the ball rolling with RIFT Tax Refunds

Sorting out tax on relocation payments isn’t exactly fun. But with the right help, it doesn’t have to be a headache. At RIFT, we’re here to make it easy. We handle the paperwork, ensure compliance with HMRC guidelines, and help you claim any tax relief you’re entitled to.

Need assistance with your disturbance allowance? Contact RIFT today, and let us take the stress out of your tax return.