If you are about to embark on a home move to a new area, you may be feeling both excited and nervous. There’s a whole bunch of new possibilities waiting for you in your new location, but there’s also a lot to take care of before you move.
Moving expenses and tax are perhaps not the most exciting things to talk about, but certainly something you need to know about if you have an upcoming relocation.
If you are moving to a new area, and particularly if this is because of a new job, you may qualify for something called a relocation allowance. This allowance makes your moving expenses exempt from tax. If you’re moving for other reasons though, claiming for tax becomes a little trickier. Here’s everything you need to know.
What is considered relocation allowance?
You might be wondering if moving expenses are tax deductible. Unfortunately, if you’re simply moving from one home to another in a nearby location, they aren’t. However, if your employer is contributing to your home move and relocation costs, you may not have to pay tax on them as this is a relocation allowance. This allowance exempts payments made to you by your employer to move home.
HMRC considers a relocation to mean that you’ve changed your sole or main residence. Meaning you’ve moved away from the main home where you and your family spend most of your time.
You’re not expected to sell your old home to qualify for tax relief, but your relocation must result in a change to your main residence.
The moving expenses involved in relocation allowance that you may qualify for include:
- Estate agent and legal fees
- The cost of disconnection charges for utilities services
- The purchase of a new residence
- Survey fees
- Stamp duty and Land Registry fees
- Transporting your belongings and temporary storage
When your moving expenses are exempt from tax
There are some situations in which your moving expenses are exempt from tax due to a relocation allowance.
You won’t pay tax on moving expenses if: you are relocating because you are starting a new job, if you have been transferred, or if the business you work for has moved to a new location. This also applies if your old home isn’t within a reasonable distance from your new place of work.
If your employer has paid or reimbursed you for eligible expenses, you won’t pay tax on your moving expenses. And if you include the costs on your tax return within a year from the end of the tax year in which your location changed, your moving expenses will be exempt from tax.
Claiming moving expenses
If you qualify for a relocation allowance, you can claim moving expenses up to £8,000. But it is important to keep in mind that a relocation allowance is a tax exemption and not a tax deduction. In other words, it only applies to what your employer contributes.
Any costs you incur over and above the £8,000 limit can’t be claimed. You also can’t claim compensation for any losses you experience, such as selling your home below market value. Additionally, you can’t claim for the Council Tax you’ll be required to pay on your old home while it is empty or for the cost of redirecting your mail.
Our Move Specialists are all kinds of clued up on moving expenses and tax, and we can give you all the advice you need on handling these aspects of your home move. We’re also able to take care of your council tax and set up your new home for you, taking the stress out of your relocation. To find out more, visit our website.