hmrc homeworkers allowance

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How to claim the working from home tax relief.

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Updated October 19, 2023

In this guide

Important information

Tax treatment depends on your individual circumstances and may be subject to future change.

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

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• The cryptoasset market is generally unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.
• The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker  here .
• Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. Learn more about FOS protection here .
• There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.
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• Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.
• You should do your own research before investing. If something sounds too good to be true, it probably is.
• Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
• A good rule of thumb is not to invest more than 10% of your money in high-risk investments .

If you are interested in learning more about how to protect yourself, visit the FCA’s website  here

For further information about cryptoassets, visit the FCA’s website  here

Were you told by your employer to work from home during the pandemic? If so you can apply for tax relief up to £140 per tax year .

Some workers will be able to claim for this 2022/23 tax year too, giving them up to £420 in tax relief . The money is to cover extra costs such as higher heating and broadband bills. Don’t worry if you have yet to claim as the HMRC deadline is a couple of years away.

In the article, we explain:

• How does WFH tax relief work?
• How to claim WFH tax relief
• When is the deadline to apply for the relief?
• Can you make a claim for the 2022/23 tax year?
• Who is eligible and how do you check?
• How much will you get in WFH tax relief?

Read more: Highest-paying jobs in the UK

What is WFH tax relief?

As a result of the pandemic, millions of people were told to work from home by their employers over the past couple of years.

While commuting costs will have fallen, other bills such as your gas, electricity and internet are likely to have increased as a result of you spending more time at home.

To help cover these extra costs, HMRC allows you to claim tax relief. You can do so using a designated online portal .

Around three million people made a claim for the entire 2020/21 tax year.

How to claim working from home tax relief

To claim for the working from home tax relief:

• Head to the government’s microservice portal and answer the eligibility questions
• During this process you also be asked about other work-related expenses that you could claim for too
• your national insurance number
• a recent payslip or P60 or a valid UK passport
• Once logged in, state the date that you started working from home
• If you have been working since the start of the first lockdown (23 March 2020 ) put that date in and you will get a rebate for two whole tax years (6 April 2020 to 5 April 2021 and 6 April 2021 to 5 April 2022) and the two weeks extra
• If you have already claimed for 2020/21 tax year, you will not automatically receive a refund for the 2021/22 tax year. You must again use the microservice portal to apply.

NOTE: If you do self-assessment, you won’t be able to use HMRC’s online portal; instead apply for the tax relief in your tax return . 

How is the tax relief paid?

You can backdate a claim to cover the first tax year of the pandemic (2020/21) and the two weeks before as well as the second year (2021/22), if you have been working at home since the first lockdown was announced on 23 March 2020.

Where an employee meets the criteria to claim tax relief for working from home and makes a claim for previous years, HMRC will issue a tax refund.  This is usually in the form of a cheque.

If you are claiming for the current tax year then you will pay less tax when you are paid. This means your tax code will change.

How much tax relief will I get?

There are two options to getting the tax relief:

• Your employer: can cover your expenses and pay them into your wages tax-free
• You claim: given the difficult time that many businesses have faced, you are more likely to claim tax relief from HMRC instead of your employer covering the costs

NOTE: You can’t do both. You will be unable to claim tax relief if your employer is paying your expenses.

If you do claim yourself, how much you will get depends on the rate of income tax you pay:

• Basic-rate taxpayers get £1.20 a week (tax relief of 20% on £6) = £62.40 per tax year
• Higher-rate taxpayers receive £2.40 a week (tax relief of 40% on £6) = £124.80 per tax year
• Top-rate taxpayers will receive £2.70 a week (tax relief of 45% on £6) = £140.40 per tax year

If you didn’t claim for last tax year or the one before but worked from home, you can backdate your claim. This means you would get up to two full years’ payment as a lump sum in your next salary.

If you are eligible to claim for the current tax year too, that’s three years of tax rebates, meaning:

• Basic-rate taxpayers could receive as much as £187.20
• Higher-rate taxpayers could get up to £374.40
• Top-rate taxpayers could receive up to £421.20

HMRC will accept backdated claims for up to four years.

Working-from-home tax relief is an individual benefit, so a couple or a group of flatmates can all claim it if you are all working from home.

You can use our income tax calculator to work out your payments.

What is the deadline to apply for WFH tax relief?

If you worked from home during the 2020/21 and 2021/22 tax years but failed to apply for the rebate, you can still do so. HMRC says it has no plans to close the online portal or microsite.

Claims can be backdated, meaning that you may be eligible for up to £280 tax relief if you claim for both last tax year and the one before (essentially the two years during the pandemic). Few workers will be able to claim for the current tax year.

HMRC confirmed that you have until the 5 April 2025 to make claims for 2020/21 tax year, and until 5 April 2026 make claims for 2021/22.

Can I still claim for working from home tax relief in 2022/23 tax year?

Some workers will be able to claim for the current tax year. But many people won’t be eligible for this tax year as it is no longer a legal requirement to work from home.

You can claim if you have additional household costs as a result of working from home and your employer has not already paid these extra expenses.

In order to claim for this tax year, which started on 6 April 2022, one of the following must apply:

• You can’t perform your job on your employer’s premises because they don’t have the facilities; for example, your employer has a small office with no space for you to work there
• Your job requires you to live so far from your employer’s premises that it would be unreasonable for you to travel there every day; for example, the workplace is in Birmingham but your job requires you to work in Scotland
• Or government restrictions mean you must work from home; though these restrictions have now been removed so can no longer be applied for this tax year

To claim tax relief, you cannot have just chosen to work from home.

HMRC also warned that employers who simply tell employees to work from home may not be sufficient to claim tax relief. So if you are hybrid working (that is, working from home for part of the week), you can only claim tax relief if there is a lack of appropriate facilities on your employer’s premises to do your job.

The government has outlined several examples where staff can claim working from home tax relief.

If you do meet the criteria for this tax year you could be entitled to as much as £420 in pandemic-related tax relief when you include the past two tax years.

Does my tax code change if I work from home?

Yes, if you are in receipt of the work-from-home tax rebate then your tax code will change.

You can usually find your tax code on your pay slip. The most common tax code for the 2022/23 tax year is 1275L. The number represents the personal tax allowance for most earners in the UK, which is £12,750 – this is the amount you can earn in a year tax-free.

So if you’re in receipt of the tax rebate, this code will change to reflect the fact that you have a larger personal tax allowance. Although bear in mind that this number could be different for other reasons, such as if you’re receiving a different tax benefit like a company car.

If you have claimed the working from home tax benefit in the past and you’re no longer eligible, you should check your PAYE tax code to ensure you’re not still receiving it.

It’s important to check because if you continue to claim while no longer eligible, you will be forced to pay additional tax at the end of the tax year.

If you are receiving the working from home tax rebate when you shouldn’t, get in touch with HMRC to get your tax code changed.

Who is eligible for tax relief for the last two tax years?

Not everyone is eligible to claim for the last two tax years so you need to check first that you:

• Were told to work from home by your employer. You cannot claim tax relief if you chose to work from home
• Have had to pay higher costs related to working from home (but you don’t need to show evidence of this)
• Must not be receiving expenses directly from your employer to cover the extra costs of working from home

Do you pay tax by self-assessment? You can still claim the tax rebate but you need to apply for it in your tax return rather than through HMRC’s online portal.

If you are still unsure whether you are eligible, there is a government tool that can help you find out.

NOTE: If you are self-employed, you can’t claim because you work for yourself. However, you can claim expenses on your tax return.

If you are new to tax returns, check out our guide to self-assessment .

What if the rebate doesn’t cover my extra needs?

If the sum provided does not come close to the extra costs that you have incurred, you can apply for relief on higher sums.

There are two options:

• If you complete a self-assessment form each year simply add the claim to that
• Fill in the P87 form that allows workers to claim back expenses up to a maximum of £2,500

HMRC says that additional costs include things such as:

• Metered water bills
• Home contents insurance
• Business calls
• New broadband connection

They do not include costs that would stay the same whether you were working at home or in an office, such as rent, council tax, or your chocolate digestive habit.

You will need:

• Your employer’s name and PAYE reference (which you can find on your payslip or P60)
• Your job title
• Receipts (to provide evidence of these extra costs)

You won’t get back the full cost of the extra expenses, only tax relief on the total. For example: if you have spent £500 on extra costs, as a basic-rate taxpayer, you will see your net wages increase by 20% or £100.

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Working from Home Tax Relief – what you need to know

Homeworking has become the norm for millions of people following the pandemic. But the rules on claiming tax relief for additional household costs you incur when working from home have changed. So read on to find out if you’re still eligible to claim up to £140 per year and whether can you still backdate your claim.

What is the Working from Home Allowance?

The government introduced working from home tax relief in 2003 to allow for anyone working from home to claim back some tax to help cover the increased household costs associated. This used to add up to a £4 a week tax-free sum.

However, because the pandemic forced millions more people to work from home, the government upped the amount to £6 a week. And the rules were also temporarily changed so you didn’t need to prove that you worked from home regularly. Instead, it meant you could claim up to £140 per year even if you only worked from home for one day.

But with all covid-related financial measures now removed, millions of workers are now back in the office either full time or part time. And in response, HMRC has updated its guidance for the 2022-23 tax year and introduced criteria that makes it harder to get a tax rebate for working from home.

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Working from home tax relief: What has changed?

The eligibility criteria for the working from home tax rebate is different depending on which tax year you are claiming for.

For the 2020-2021 and 2021-2022 tax years you’ll need to meet the following criteria to be eligible for working from home tax relief. You can claim for these tax years if:

• Your employer told you to work from home.
• Your household costs increased because of working from home.
• And your employer did not pay you expenses to cover the extra costs associated with working from home.

You can backdate claims for the working from home allowance, so there is still time to claim for both the 2020-21 tax year and the 2021-22 tax year.

However for the 2022 – 2023 tax year the working from home tax relief eligibility rules have changed. The new rules state you can’t claim tax relief if you ‘choose to work from home’. This includes if your contract lets you work from home some or all of the time, if you work from home because of Covid or if your employer has an office, but you cannot go there sometimes because it’s full.

But some people will still be able to make a claim with the HMRC working from home allowance applying if your job requires you to live far away from your office. Or if your employer doesn’t have an office.

You can’t claim working from home tax relief if you are self-employed . Instead, though you can include some expenses on your tax return.

Need an independent financial adviser or tax advice? Find a local adviser and book your free initial consultation through our partners at Unbiased. 

You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.

How to apply for the working from home allowance

HMRC have set up a specific online portal where you can claim working from home tax relief. You can find it at www.gov.uk/tax-relief-for-employees/working-at-home .

The portal starts off by asking you a series of question to check you are eligible for the working from home allowance. And it states clearly that different eligibility criteria apply to different tax years.

After that you will need your Government Gateway user ID and password to make your claim. If you don’t already have a user ID, it takes a few minutes to create one.

Once you’ve logged in, you need to give the date of when you started working from home. If this was the start of the first lockdown back in 2020, the date will be 23 March 2020. You can then claim the working from home tax allowance for the entire 2020-21 tax year plus the two weeks before. This is because the new tax year starts on 6 April, but lockdown started on 23 March. You can also claim for the 2021-22 tax year at the same time and the 2022-2023 tax year if applicable.

If you pay your tax via self-assessment, you can’t claim the working from home allowance through the portal. Instead, you’ll need to apply via your tax return.

How much tax relief can I claim?

The working from home allowance is designed to cover the extra costs you incur when you work from home rather than heading off to the office. It can be tricky working out exactly how much of your heating or electricity bill is associated with the time you were at your desk so there is essentially a flat rate of £6 a week you can claim.

You can get this payment in two ways:

• Your employer can pay it : You can get an extra £6 a week tax-free through your salary.
• You can claim tax relief on it from HMRC : If your employer won’t pay you the allowance, but you have or had extra unavoidable costs due to working from home, you can deduct the amount from your taxable income. You then claim tax relief on it from HMRC.

Tax relief on £6 a week adds up to:

• £1.20 a week for basic rate taxpayers, or £62.40 a year
• £2.40 a week for higher rate taxpayers, or £124.80 a year
• £2.70 a week for additional rate taxpayers, or £140.40 a year

If your home working costs add up to more than £6 a week you can claim tax relief for a larger amount. However, you will have to provide evidence to the taxman of what your costs were, such as receipts, bills or contracts. You must also prove these costs were directly connected to your employer’s requirement for you to work from home.

Need help with your tax return? Find an accountant and book your free initial consultation through our partners at Unbiased. 

What can I claim working from home tax relief for?

You can only claim for things to do with your work, such as:

• business phone calls
• gas and electricity for your work area

If you need an accountant to help with your tax return, our partners at Unbiased can match you with the right adviser .

Can I still make a backdated claim?

HMRC says it will continue to accept backdated claims for people who have not yet claimed stating that taxpayers will receive a ‘lump sum payment’ for any successful backdated claims. It also stated that taxpayers have until the 5 April 2025 to make claims for 2020-21 tax year, and until 5 April 2026 make claims for 2021-22.

If you want to make a backdated claim you can do this via HMRC’s Working from Home Allowance portal.

How will I get the money?

If you are claiming for 2022-2023 tax year HMRC will adjust your tax code, and you’ll receive the tax relief through your salary.

And tax experts are urging employees who have previously made a claim to check their PAYE tax codes because if HMRC has included the relief and you are no longer eligible then you could get a surprise tax bill.

With more than 27,000 regulated financial advisers, our partners at Unbiased can match you with the right adviser. Find a financial adviser today.

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How to claim tax relief for working from home

Working from home due to coronavirus? You may be able to claim an extra £125 a year...

The good news is that it's possible for employed people to claim some money back for working from home expenses, in the form of tax relief paid by HMRC. Here's everything you need to know about claiming back costs ...

Can I claim tax relief for working from home?

If you’re employed and working from home, you can ask your employer to cover ‘reasonable’ costs that are specifically required for your employment. This might include desks, chairs and tech equipment.

‘There is no legal obligation for your employer to do this, but many will,’ says Faye Watts, tax partner at Fuse Accountants . ‘In many cases, employers may be willing to pay you an extra £6 a week to cover your increased costs, and this is tax-free.’

HMRC tax relief working from home

If your employer won’t pay, you can claim tax relief as an allowance through HMRC , even if you only work from home or one day in a tax year.

How much you can claim is calculated as a percentage of £6 per week, depending how much tax you pay:

• Basic 20% rate taxpayers can gain £1.20 (20% of £6) a week.
• Higher 40% rate taxpayers can gain £2.40 a week (40% of £6).

Can I claim tax relief for the 2021/22 tax year?

Yes, this applies for the 2021/22 tax year. Apply for working from home tax relief online at Gov.uk , or by calling HMRC .

Anyone required to work from home , even for one day, could also apply for tax relief for the whole 2020/21 tax year.

Working from home tax relief for the self-employed

If you’re self-employed , you can also take advantage of tax relief when working from home.

‘Self-employed people can claim a similar amount of tax relief to PAYE employees, starting from either £10, £18 or £26 a month, depending on the hours worked from home per month,’ says Faye.

‘Alternatively, you can claim tax relief on the expenses relating to the space in your property that you use for business, again based on how many hours you work fromhome in that space.’

How do I claim tax relief for working from home?

Applying for tax relief for working from home can be done through the government's dedicated site . "We want everyone to get the money that they are entitled to, so we’ve made the online service as easy to use as we can – it takes just a few minutes to make a claim," explains Karl Khan, Interim Director General of Customer Services at HMRC.

In order to claim, you'll need a Government Gateway User ID and password. If you haven't ever registered for this, you'll need to do so before you can claim. You can create a Government Gateway User ID through the HMRC Services website and you'll need your National Insurance Number and recent payslip, P60 or a valid passport.

GH TIP: If you do a tax return and pay tax by Self Assessment, you have to include your working from home relief on your tax return form.

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Our Complete Guide To Work From Home Tax Relief in the UK

As the work landscape continues to evolve in the wake of the global pandemic, more people are embracing the concept of working from home. To support these employees, the UK government has introduced a range of work from home tax relief schemes. In this comprehensive guide, we will discuss various tax relief options available for remote workers, including tax relief for working at home, how to claim tax relief for working from home, eligibility criteria and what’s changed with the work from home tax relief scheme in 2023.

What is The Work From Home Tax Relief Scheme?

The Work from home tax relief scheme, also known as Working from Home Allowance, is a Government scheme launched in 2003 to allows employees working remotely to claim tax relief on certain expenses incurred while working from home.

Initially set at a £4 a week tax-free sum, the allowance was increased to £6 a week with the pandemic forcing millions of workers to work from home.

Now that all Covid-related financial restrictions have been lifted, millions of employees are returning at work either full- or part-time. In response, HMRC revised its instructions for the 2022–23 tax year and overhauled some of their requirements to qualify for the tax relief.

Tax Relief for Working at Home: What Expenses Are Covered?

The tax relief for working at home aims to help home workers cover additional costs they might incur relating to business phone calls and electricity/gas.

A limitation of the work from home tax relief scheme is that you cannot claim claim back on bills that are used for both private and business use, for eg broadband.

Tax relief home working benefits can be claimed in two ways:

a) Flat-rate expenses: Employees can claim a flat-rate allowance of £6 per week or £26 per month, a standard amount set by the government to cover additional expenses incurred when working from home.

b) Actual expenses: If an employee believes that their actual expenses are higher than the flat-rate allowance, they can claim tax relief on the actual amount spent. However, this requires providing evidence and receipts for the additional expenses incurred.

If you wear a work uniform, specialist work clothing or Personal Protective Equipment (PPE), you may be able to claim additional expenses back .

How much tax relief can I claim?

You can either claim tax relief on:

• £6 a week since 6 April 2020, or
• the exact amount of extra costs incurred above the £6 weeklyamount, however you’ll need to provide evidence (receipts, bills or contracts).

Tax relief from working from home is based on the tax rate you pay. This means that if you’re on the basic taxpayer rate of 20% and claim back £6 of working from home tax relief, you’ll get £1.20 per week back. Per year, the tax relief adds up to:

• £1.20 a week for basic rate taxpayers, or £62.40 a year
• £2.40 a week for higher rate taxpayers, or £124.80 a year
• £2.70 a week for additional rate taxpayers, or £140.40 a year

How to Claim Tax Relief on Working from Home

You can claim this payment in two ways:

• Claim tax relief directly from HMRC with an online form, or
• Your employer can pay it through your salary.

To claim tax relief directly with HMRC, head to their online portal . You’ll first need to answer a first questions online to ensure you’re eligible for the home worker tax relief scheme. Once qualified, you’ll be asked to log into your Government Gateway account with your user ID and password in order to submit your claim directly within the portal.

If you pay your tax with a self-assessment every year, you will need to submit your claim directly within your tax return - you won’t be able to claim the working from home allowance through your online portal.

You can claim tax relief for working from home for up to four tax years. The tax relief you’ll be able to get will depend on your tax rate for the period you’re claiming back and what the eligibility rules were for it as well.

Tax relief for working from home in 2023: What has changed?

The good news is that as remote working becomes more prevalent in the UK, the Government continues to support employees through work from home tax relief schemes.

Eligibility rules to claim back wfh tax relief for the 2022-2023 tax year have changed. You will be able to claim tax relief on working from home is:

• your employer doesn’t have an office, or
• if your job requires you to live far away from the company’s office,

If your employer has an office and/or your employment contract allows for remote working (home working or else) but includes an office as your regular place of work, you will not be able to claim this allowance.

These rules are to stay for remain for the 2023/2024 tax year.

This is significant change from previous tax years, notably 2020-2021 and 2021-2022 tax years. In previous tax years, workers could claim home worker tax relief if their employer requested them to work from home, or if they worked from home more frequently and/or if their employer didn’t pay any increase in costs linked to working from home.

A few final tips to help you claim home worker tax relief

• Keep accurate records of your expenses and maintain receipts for any actual expenses claimed.
• Stay informed about any changes to the tax relief schemes or new initiatives introduced by the government - tax years in the UK start on April 6th every year.
• Consult a tax professional or accountant if you're unsure about your eligibility or how to claim

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Mary McDougall in London

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The UK government has been urged by tax experts to reform and clarify laws around homeworking, as they warned more people were being caught up in “complicated and inconsistent” rules.

Some 44 per cent of UK workers spent some or all of the time working from home between September 2022 and January 2023, according to data on Monday from the Office for National Statistics.

While comparable pre-coronavirus pandemic statistics are not available, only about 5 per cent of the workforce in 2019 said they mainly worked from home over the year.

“The rules and tax treatment for homeworking are surprisingly complex and some of the inconsistencies can be difficult to fathom,” said Helen Thornley, technical officer at the Association of Taxation Technicians, a professional body.

The calls for reform come as the trend towards hybrid working — where workers spend part of the week working from home and the rest in the office — looks set to last well beyond the peak of the pandemic .

More than half of Britons earning more than £50,000 told the ONS that they were hybrid workers, and under legislation progressing through parliament, employees will soon have the right to request flexible working arrangements from the first day of a new job.

But Sir Edward Troup, former executive chair of HM Revenue & Customs, the UK tax agency, said rules remained based on “19th-century concepts”, which favoured self-employed people, traditionally more likely to be homeworkers, because they were viewed to be taking more risk than others.

“A clear policy, based initially on achieving a neutral outcome should be the starting point,” he said, adding that “there is a policy choice here but currently there is no policy — it has grown ad hoc”.

One crucial concern among tax experts relates to the tax treatment of office equipment to be used at home, which depends on who pays for the items.

Thornley said the ATT was aware of “reports that for staff with flats in London, the typical office desk that an employer might look to supply to them just doesn’t fit. But they can’t go out and buy their own and claim it back from their employer — even if the employer is quite happy to pay — without a tax issue arising.”

Caroline Miskin, senior technical manager of the Institute of Chartered Accountants in England and Wales, said it made “no sense to have a different rule depending on who actually buys the equipment when the employer is bearing the cost anyway”. 

Specialists have also criticised the unfair application of tax deductibility for homeworkers’ bills. Anyone who works at home between two and five days a week is eligible for a £6 weekly payment tax-free from their employer. If the company does not pay the £6 allowance, the homeworker cannot claim the equivalent tax deduction from HMRC.  

Meredith McCammond, technical officer at the Low Income Tax Reform Group, described the £6 allowance as “too low” and called on ministers to review how it could be applied on the basis of actual additional costs incurred through homeworking.

In a report last year, the Office of Tax Simplification, a statutory body, also found a lack of clarity around what travel can be tax deductible, with people increasingly working from “home offices”.

Unlike the UK, commuting costs in countries including France, the Netherlands, Denmark and New Zealand are partly or fully tax deductible. However, employees based from home and occasionally required to travel into the office can claim tax relief for their journeys.

“The government should clarify by way of policy and guidance the treatment of business travel and commuting for the hybrid working employee,” the OTS said. It added that a number of hybrid workers “suggested that they need the encouragement of tax relief to make the trip into the office”.

HM Treasury said: “Tax simplification is a priority for this government and we keep all taxes under review.”

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The home office allowance: how to claim if you work from home

• Last updated 29 Dec 2022

If you’re self-employed, there are two ways through which you can claim your home as an expense:

• Calculate your rent, mortgage, and bills, then figuring out what proportion of your home you use for business
• Use a flat rate – this is called the home office allowance

How much is it?

It all depends on how often you work from home.

What counts as working from home?

• Any work you do for your clients or contractor
• Doing your taxes (including chatting with TaxScouts ‘ customer support)
• Sorting out your receipts and invoices
• Basically everything that’s work-related

What HMRC actually cares is that your “business use” is reasonable . In most cases that means that it should be in line with what you earn from self-employment.

For example:

• if you’re a freelance software engineer, you spend your time writing code from home, and earn the equivalent of a full-time wage, then you can claim about 40 hours
• but if you’re an Uber driver who spends most of the time on the road, you’re probably limited to the minimum of 25 (or even less).

Should I claim it?

It doesn’t make sense to claim the home office allowance if:

• You don’t work from home often (or can’t justify to)
• You’re paying a high rent or mortgage (especially if it’s for a one-bedroom: the number of rooms matters when you calculate the percentage of time you’re using your home for business)
• You are claiming a better allowance, like the £1,000 trading allowance

HMRC has also built this tool that can help you check if using simplified expenses is right for you.

Example of simplified expenses:

• the home office allowance
• the mileage allowance

Your situation

Can i claim anything else if i use it.

• internet bills

For these, just work out the percentage of time that you use them for your self-employed business.

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Claiming tax relief for homeworking expenses – updated guidance.

This is a follow-up to the earlier PSTAX advice in relation to claiming tax relief for working from home . Rather than an employee making a claim to HMRC, it is also possible for an employer to pay a ‘homeworking allowance’ to employees without giving rise to a tax/NIC liability. Unlike the tax relief claim, the exemption conditions for the payment of the allowance are less restrictive and so only two tests need to be met:

• there must be homeworking arrangements between the employer and the employee; and
• the employee must work at home regularly under those arrangements.

The arrangements should be part of the clerk’s contract, and these arrangements do not need to apply to all employees who may have a home base but work in a hybrid manner. Where these conditions are met, the employer may pay up to £26 per month (or £6 per week) to the clerks without any tax/NIC being due. Higher figures than this can be paid, but anything above the £26 will be treated as earnings for tax/NIC purposes.

If a clerk has multiple employers, each employer would be treated separately and so they could each pay the £26 per month.

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• Homeworking rules and expenses

Employee expenses

Special rules for home-working employees.

To obtain tax relief for working at home as an employee, it will normally be necessary for your contract of employment to require you to work from home. Where working at home is optional, it is very unlikely that HMRC will accept a deduction for expenses.

There are special rules for employees who work from home. These cover the following areas:

• Reimbursement by employers for additional household expenses (s316A ITEPA 2003)
• Provision of office equipment by employers (s316 ITEPA 2003
• Provision of computers for private use by employers (s320 ITEPA 2003)
• Travel for necessary attendance (s338 ITEPA 2003)

We shall look at these in turn, pointing out what you might claim and what restrictions there are. As before, we need to consider reimbursed expenses and non-reimbursed expenses separately.

Reimbursed household expenses

Which costs are included.

Employers may reimburse employees for the additional household expenses incurred through regularly working at home. The relief (given by ITEPA 2003 s.316A) covers, for example, heating and lighting costs, additional insurance, metered water, telephone or internet access charges. Where working at home leads to a liability for business rates, this can be included.

Costs must relate to the work area of the home. Costs that are the same, whether or not you work at home, cannot be included. Specifically this includes mortgage interest, rent, council tax and water rates.

Also excluded are costs that put you, as an employee, in a position to work at home. This would be expenses  such as building alterations, furniture or office equipment. However, the employer can provide office equipment and office furniture to the employee as described below.

How much can the employer pay?

HMRC will accept reimbursements up to £4 per week without the need for supporting paperwork. If reimbursements are to be a higher level, these must be justified and detailed records kept by the employee, or they must be specially agreed with HMRC. (See http://www.hmrc.gov.uk/manuals/eimanual/EIM32815.htm ).

Points to note

• The tax relief is for reimbursement of expenses. If expenses are incurred, but not reimbursed, they need to pass the stricter test outlined in the first section above  and may not qualify (s.336 ITEPA 2003).
• No relief is given for occasional working at home or for informal arrangements. This excludes, for example, work done at home in the evenings or at weekends.
• To qualify, employees need some sort of home working agreement where they regularly work at home. Reimbursement by the employer is not taxable even if homeworking is by choice – see http://www.hmrc.gov.uk/manuals/eimanual/EIM32830.htm

There is more information on the HMRC website at http://www.hmrc.gov.uk/manuals/eimanual/eim32760.htm .

Office equipment provided for homeworkers

Employers can provide the necessary office furniture, equipment and internet connections for a homeworker, without there being a liability for the employee so long as

• the sole purpose is to enable the employee to perform the duties
• private use is insignificant

This relief is given by s316 ITEPA 2003.

There is further guidance on this issue on the HMRC website at  http://www.hmrc.gov.uk/manuals/eimanual/EIM21611.htm

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HMRC Subsistence Rates: Everything You Need to Know

Getting to grips with HMRC subsistence rates is key for any UK business, but it can feel like a lot to take on. 

What expenses can you claim for? How do these rules impact your budget? This guide aims to simplify things. 

We’ll walk you through:

What are HMRC Subsistence Rates?

Is meal allowance taxable in the uk, how hmrc subsistence rates affect your business budget, hmrc meal allowance rates for 2023/2024, international meal & room allowance rates for uk businesses, how to report subsistence allowance to hmrc, best practices for managing travel expenses, streamlining travel expense management with expensein.

With clear, easy-to-follow advice, we’re here to help you navigate these rules with confidence, making sure your business stays on track and in line with HMRC regulations.

The HMRC offers a handy set of guidelines for businesses that allow them to reimburse employees for certain work-related expenses. This is what we call subsistence rates . 

Essentially, HMRC subsistence rates are pre-set amounts that businesses can pay employees for travel costs without jumping through hoops every time for approval.

What Qualifies for Meal Expense Claims?

The expenses for meals or beverages must be paid for after the commencement of the work-related trip.

The trip must be outside of their regular commute and must be undertaken for official business purposes.

The travel must require the employee to be away from their usual workplace for a minimum of 5 hours.

Note : Starting from April 2019, HMRC has eliminated the need for businesses to present receipts for all expenses related to a business trip. This change means less paperwork for everyone involved - from business owners to finance teams to the employees filing claims.

Good news - since 1998, they're not. This means when your employees travel for work and eat out, these meal costs won’t be taxed.

For businesses, this is a win-win. If your meal expenses tick all the boxes we talked about before, you can subtract these costs from your total taxable income. Essentially, you're left with a lower taxable amount, which could mean paying less to HMRC.

If no actual meal or drink is bought.

If the meal expense isn’t extra to what you'd normally spend.

If you're using the "staying with friends or relatives" allowance.

If meals are eaten at home.

If meals are included as part of a training course, conference, or similar.

If your meal is included in the cost of your train or plane ticket.

Changes to HMRC subsistence rates play a big role in shaping your company’s budget, especially if your team often travels for work. 

Here’s what you need to know:

If these rates go up, you'll find that the costs for meals and small expenses during trips increase, which could bump up your overall travel and expense budget.

A decrease in rates, on the other hand, might give you a bit more wiggle room in how you allocate your budget.

It's super important to stay on top of these rate changes to make sure your business stays on budget and follows HMRC rules.

So, what can your business do to adapt?

Tips for Adapting to Changes in HMRC Subsistence Rates

Perform regular policy reviews. Keeping an eye on your travel and expense policies can help you spot where you might need to make some tweaks. Maybe it’s time to set some spending limits, tighten up approval processes, or encourage choosing less pricey options for meals and incidentals.

Use technology to your advantage. Leverage an expense management system to track and manage employee travel expenses efficiently. These tools can automatically update changes in subsistence rates, ensuring financial compliance and simplifying the reimbursement process.

Educate your team. Keep your employees informed about the importance of adhering to the updated subsistence rates and company policies. Regular training sessions can help ensure everyone is on the same page and can help reduce overspending.

Negotiate with vendors. For businesses with significant travel needs, negotiating rates with hotels and meal providers can lead to cost savings that help offset changes in subsistence rates.

Plan for contingencies. Always have a contingency budget for unexpected changes in subsistence rates or travel needs. This ensures your business can adapt without compromising on financial stability.

For travels lasting 5 hours or more : The maximum claimable meal allowance is £5.

For durations of 10 hours or more : A £10 meal allowance is applicable.

If away for 12 hours or more : You are entitled to a £15 meal allowance.

For a full 24-hour period or longer : The meal allowance reaches a maximum of £25.

The HMRC calculates these durations from the moment one departs from their home or primary workplace until their return.

Note : These HMRC travel and subsistence rates apply only to travel within the United Kingdom. For a comprehensive list of recommended allowance rates by country, visit the HMRC website .

For UK-based businesses with employees who travel internationally, HMRC offers a detailed list of suggested meal and accommodation allowances by country . 

Below, we’ve summarised the rates for some top business travel destinations to help with your planning:

United States (USD):

Meal allowances range from $21 to $34.50 for a duration of 5+ hours, and room rates vary, with cities like Boston and New York City on the higher end at around $239 and $216 respectively.

Canada (CAD):

Canadian cities like Ottawa and Toronto offer meal allowances from $38.50 to $47 for 5+ hours, with room rates up to $224 in Vancouver.

Europe (EUR):

In European cities, meal allowances for 5+ hours stretch from €22 in Berlin to €40 in Paris. Room rates in Paris are around €199.50, showcasing the variety across different cities.

In China, cities like Bangalore and Beijing provide meal allowances from ₹1685.50 (INR) and ¥232 (CNY) for 5+ hours, respectively. Room rates can go as high as ¥1344.50 in Beijing and ₹16809.50 in Bangalore.

In Singapore, a 5+ hour meal allowance is SGD 91.50 with room rates at SGD 318.

Hong Kong stands out with meal allowances of HKD 292.50 for 5+ hours and room rates reaching HKD 2376.50.

HMRC's guide includes how to utilise these rates for reimbursing employees for international business travel and reporting these expenses. 

This concise overview is to give businesses a quick reference to budget for travel expenses in various global cities.

When it comes to reporting your business's subsistence allowance spending to HMRC, the process folds into your usual end-of-year financial reporting. 

Specifically, you'll need to fill out a P11D form for each employee who has received expenses or allowances, such as per diem or meal allowances, over the tax year. In some cases, you might also need to complete an additional P11D(b) form.

Your team must submit their expense reports regularly , ideally after each business trip, to account for any subsistence expenses. 

Due to the broad nature of what can count as subsistence expenses, it's important to vigilantly review these claims. This helps in preventing false or exaggerated claims and ensures the integrity of your expense reporting against any potential fraud .

Visit HMRC’s website for a detailed guide on how to report expenses and benefits .

Create a clear travel policy : Draft a travel and expense policy that spells out what’s covered, spending limits, and how to get expenses approved. Make it as clear as possible.

Educate your employees : Make sure everyone knows the policy inside out. Offer guidance on how to spend wisely while travelling for work.

Opt for cost-effective options : Encourage the team to save money where they can, like booking hotels early or choosing budget-friendly meal options.

Leverage technology : Tap into technology with expense management software. It makes tracking employee spending and getting reimbursed much simpler.

Regularly review and update your policy : Regularly check and tweak your travel policy to make sure it’s up to date with the latest rules from HMRC and matches up with what’s happening in the travel world.

With these strategies, businesses can better manage their travel expenses , ensuring they stay economical and in line with HMRC standards.

For businesses looking to get a handle on travel and expense management, ExpenseIn is a game-changer.

What Makes ExpenseIn Stand Out?

Effortless expense tracking : No more wrestling with spreadsheets. ExpenseIn brings everything into one place, making it easier to create, approve, and report on expenses.

On-the-go claims submission : With its mobile app , submitting expenses is as easy as snapping a picture, whether it’s for a taxi ride or a business lunch. Plus, it automatically works out mileage and even how much carbon you’re using.

Real-time reporting : Get a clear view of your spending with real-time reports . This means you can see where money is going and make smarter budget decisions.

Automated workflows : ExpenseIn automates the boring stuff - like checking receipts and reminding you of policy rules - so you can focus on more important tasks.

Integration capabilities : It easily syncs with the other tools and systems you’re already using, smoothing out your workflow.

By bringing ExpenseIn into your business, you’re not just streamlining how expenses are handled; you’re also making life easier for everyone involved. It’s about spending less time on paperwork and more time on what matters, supported by a team that’s got your back every step of the way. 

Secure, compliant, and ready to integrate - it’s how travel expense management should be.

Book a free demo of ExpenseIn today to see how ExpenseIn can help streamline your travel and subsistence expense processes.

Explore our faster, simpler and smarter approach to travel expense management.

Related stories, [free download] expenses policy template for uk businesses.

What is Spend Management? Strategies, Tools & Best Practices

Claiming Back Travel Expenses from HMRC: A Step-by-Step Guide for Businesses

Indirect Spend: The Hidden Cost Driver in Your Business & How to Control It

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HMRC confirms payslip tax codes which mean you'll get an average of £900 back

H MRC has clarified the payslip tax codes that will result in an average £900 return for workers. The tax department confirmed that employees with the codes on their payslip will receive the amount.

Following changes to National Insurance on April 6 workers nationwide will see a further 2% reduction in deductions from their payslips. These alterations were announced by chancellor Jeremy Hunt in the spring statement and budget.

National Insurance contributions are set to decrease from 10% to 8% following a previous reduction from 12% to 10% in January. Mr Hunt confirmed this move, which will affect 27m UK workers, on March 6 during his budget announcement in the Commons.

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Employees with the standard 1257L tax code can expect a take-home cash boost in their pay packet from April 6 depending on their earnings. The exact amount will vary on how much you earn with someone on the average salary of £35,400 receiving around £900 a year.

While 1257L is the standard tax code for most workers it can be adjusted if you have overpaid or underpaid tax. If you live in Wales, you're also likely to see the letter C at the front of the code to make it C1257L.

The 1257L tax code refers to the tax free personal allowance of £12,570. Other common tax codes include 1263L and 1288L where various allowances have been applied to your tax code and you can earn £12,630 or £12,880 before starting to pay tax. The allowances that entitle you to the extra tax free sum include the working from home allowance for which you have to apply to HMRC. These codes are also entitled to the national insurance tax cut.

Other letters you may see in your tax code include M or N if you're sharing personal allowances with your partner or BR, D0 or D1 if you have other employment and do not benefit from any tax free amount on this income. All these codes are entitled to the national insurance tax cut.

However if your payslip displays 'NT' you won't be eligible for the £900 this year. This is due to not meeting the £12,570 threshold yet and therefore not paying tax on your income to receive a tax return, reports CambridgeshireLive .

The policy is designed to lower the rate of National Insurance contributions for employees earning between the class one primary threshold and upper earnings limit as well as decrease the main rate of class four National Insurance contributions for self-employed individuals earning between the lower profits limit and upper profits limit. The UK Government has said: "As a result of this measure an average employee on £35,400 will receive a tax cut of over £450 per year from April 2024. An average self-employed person on £28,000 will see a tax cut of £310 a year and over two million individuals will benefit. Actual impacts for individual taxpayers will vary according to individual circumstances."

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NEWS... BUT NOT AS YOU KNOW IT

Martin Lewis’s MSE warning to check you haven’t been paying too much tax

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The Money Saving Expert is calling on everyone to make urgent checks on the taxes they pay and the benefits they receive.

Since the new tax year began on April 6, Martin Lewis is urging people to make sure they are claiming everything they are owed, and aren’t paying more than they should.

There are eight checks with HMRC and the DWP he recommends everybody makes now that the new financial year has started.

In the latest Money Saving Expert newsletter, Martin explained: ‘Forget January 1, the new year that matters is April 6… the start of the new tax year, which has a material impact on the money in your pocket.

‘It’s when new tax codes start, ISA allowances reset, and this year there are also national insurance cuts and a child benefit shake-up.’

Here’s the full list of checks which Martin Lewis recommends every person makes to mark the start of the new tax year.

People across the country will be issued a new tax code to mark the start of the new tax year. You can use the MSE  Free Tax Code Calculator  to check if your 2024/25 tax code is correct.

The team said: ‘Your tax code is a series of letters and numbers (for example, 1257L) which tells your employer or pension provider what tax to deduct.

‘However, millions of codes are wrong each year, so it’s crucial to check yours – it’s your responsibility, not your employer’s or HMRC’s.’

Self-employed National Insurance

Self-employed workers should check how much money they will now get to keep, and how much they should be setting aside, since changes to National Insurance came into effect.

Child benefit cut-off increase

Parents should check if they are among the hundreds of thousands of families benefitting from the cut-off point for child benefit being raised.

The first changes since 2013 mean you can now get full child benefits even if you earn £60,000, and some benefits even if you earn up to £80,000.

New ISA rules come into play for people who want to save up to £20,000 this year – plus there are new rules on cash savings, stocks and shares.

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LISA accounts

Martin has reminded first-time buyers aged 18 to 39 they can get a free £1,000 by putting money into a LISA savings account.

The government will top up whatever you save by 25%, up to £1,000, and you can secure an account with as little as £1.

Marriage tax allowance

People who are married or in civil partnerships could be entitled to up to £252 this tax year thanks to the marriage tax allowance. 

Universal Credit

Benefits such as Universal Credit have gone up this month by 6.7%. You can use the Money Saving Expert checker to see if you qualify for means-tested and non means-tested benefits

Attendance Allowance

The MSE team said: ‘Around one million pensioners are missing out, often due to misconceptions around what Attendance Allowance is and who can get it.

‘So don’t just assume that you – or someone you know – won’t qualify. Take the time to check.’

Pensioners could also boost their income by up to £5,500 by checking gaps in their National Insurance record and filling them for free .

Get in touch with our news team by emailing us at [email protected] .

For more stories like this, check our news page .

MORE : Bulgarian fraud gang stole £54,000,000 in UK’s biggest ever benefits scam

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HMRC last minute pension changes branded a 'shambles' as Lifetime Allowance ends

The Government has told pension claimants that they may 'wish to delay transferring to a new provider' under the new rules

• by William Morgan
• 12:18, 8 Apr 2024

HM Revenue and Customs has come under fire for making last-minute alterations to its new pension tax system, which has scrapped the Lifetime Allowance for a lower limit on lump sum payments - with the fixes and changes made to the system just days before it was due to be implemented described as a 'shambles' by an industry expert.

The changes to the pension system, among the largest in more than a decade, will end the tax-free £1,073,100 Lifetime Allowance and replace it with a tax on pension lump sum payments over an initial tax-free £268,275. However, these changes were implemented in a short timescale, with the measures passing into law in February as part of the Finance Bill - forcing HMRC to push out updated guidance just a day before the new rules took effect (April 6).

With little information about what does or does not qualify as a lump sum, HMRC have now also recommended that people do not change pension plans until the dust has settled. Andrew Tully, technical services director at Nucleus Financial, said to the industry publication Pension Expert: “To suggest at such a late stage that people should delay taking benefits or transferring shows how poorly these changes have been implemented.

READ MORE: eBay makes major change that could leave people £400 richer

Mr Tully continued: “We are only a few days away from implementation so some advisers and customers will have made plans and committed to use funds. Now HMRC is effectively delaying payments to customers or stopping them taking certain actions while it fixes incorrect legislation. It’s a bit of a shambles.”

HMRC has recommended a delay in making pension changes for the new taxation system, as the industry gets to grips with the new rules and attempts to avoid "unintentional" tax consequences under the new Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA).

Just two days before the rules came into play, HMRC was recommending that people “may wish to delay transferring to a new provider”, and those with large lump sums should "delay requesting the payment", until the dust settles on the new pension system.

Adding to the uncertainty over the new system, there has been speculation amongst pensions commentators that the Labour Party, if they win the next General Election, could bring back the Lifetime Allowance and scrap the new system, which they committed to doing when the Government announced the LSA and LSDBA in 2023.

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• HMRC publishes extra guidance on lifetime allowance abolition

Author: ICAEW Insights

Published: 09 Apr 2024

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HMRC provides further guidance on the abolition of the lifetime allowance (LTA) in the latest issues of the pension schemes newsletter. This includes answers to more frequently asked questions (FAQs). HMRC has circulated a consolidated copy of all of the FAQs published so far to the LTA working group. It will share it more widely later in April.  

HMRC advises that a scheme administrator with a query on the legislation to abolish the LTA should also consult HMRC’s pensions tax manual , which has recently been updated. The scheme administrator can also email HMRC at [email protected] . 

The newsletters summarise the changes made in regulations to the legislation to abolish the LTA. Further technical changes will be made through a second set of regulations . HMRC states that the changes mainly relate to specific protections, or to individuals who plan to transfer their pension savings to a qualifying recognised overseas pension scheme (QROPS). The regulations will be made shortly and will be effective from 6 April 2024. Guidance is also provided on the implications of abolition of the LTA with regard to the public service pensions remedy . 

Guidance in issue 157 and issue 158 of the newsletter on other areas is summarised below:

Pension remedies for politicians 

The independent parliamentary standards authority (IPSA) and the Senedd Commission intend to implement a remedy to the discrimination in the reforms to public service pension schemes. As a result of this, regulations will be introduced in 2024/25 to provide for the tax consequences relating to a member’s pension benefits where a member makes a choice for different benefits. The tax regulations will apply from 6 April 2024. HMRC has provided guidance on what will be included in the regulations. 

Annual returns for relief at source schemes 

A person operating a relief at source scheme must send HMRC a return for the tax year ending 5 April 2024 by 6 July 2024. HMRC has provided the following guidance on making a return :  

• only the versions of the spreadsheet and electronic flat text file specifications currently on GOV.UK should be used;
• the correct naming convention should be used when submitting the annual return through the secure data exchange service. Further, the file name reference should match the sub-reference included in the return. Guidance on the naming convention is provided alongside the spreadsheet and file; 
• all fields should be completed in the correct format and should not include unacceptable characters, or exceed the maximum amount of characters; and
• form APSS590 should be completed to declare that the information submitted on the return is true and complete. Without the APSS590, HMRC will consider the return to be outstanding.

Changes to HMRC forms for QROPS

Form APSS262 is used to report a transfer of funds or assets from a registered pension scheme to a QROPS. The form has been updated recently. HMRC will only accept the new version of APSS262 for transfers where the date of transfer is on or after 6 April 2024. A number of related forms were also updated on 6 April 2024. Scheme administrators should ensure they use the correct form. 

Using the managing pension schemes (MPS) service 

A person accessing the MPS service for the first time since 18 March 2024, will be asked to provide additional information to verify their personal individual details. They will only need to do this once. HMRC has asked scheme administrators to consider joining the MPS service user panel . The scheme administrator can provide feedback on the function to submit form APSS262 (see above) on the MPS service and influence the future design and development of the service. 

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• Business tax
• Pension scheme administration
• Pensions schemes newsletter 158 — April 2024
• HM Revenue & Customs

Newsletter 158 — April 2024

Published 4 April 2024

© Crown copyright 2024

This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected] .

Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.

This publication is available at https://www.gov.uk/government/publications/pensions-schemes-newsletter-158-april-2024/newsletter-158-april-2024

Abolition of the lifetime allowance ( LTA ) — communications and guidance

From 6 April 2024, information to support you to implement the LTA abolition will continue to be included in regular pension schemes newsletters. Separate LTA guidance newsletters will also be published where required, but frequently asked questions ( FAQs ) will no longer be fortnightly. A consolidated copy of all FAQs published to date has been circulated to the LTA working group and will be published in a newsletter later this month.

If you have any outstanding queries on the legislation to abolish the LTA , including specific concerns about delivering these changes, you should check the guidance available in previous newsletters and in the Pensions Tax Manual ( PTM ), which has now been updated. You can also contact us by email: [email protected] .

If your queries or feedback related to the PTM , you should email: [email protected] . PTM pages related to the LTA have now been archived, but remain publicly available on the National Archives website. You can also feedback on PTM guidance by using the ‘report a problem with this page’ tool at the bottom of each page.

Abolition of the lifetime allowance ( LTA ) — further regulations

As highlighted in pension schemes newsletter 157 , on 14 March 2024 the government made The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024. These are effective from 6 April 2024.

The newsletter also confirmed that there would be further minor technical changes made through a second set of regulations. Whilst important, they will not affect the vast majority of pension saves. They relate primarily to specific protections or to individuals who plan to transfer their pension savings to a qualifying recognised overseas pension scheme ( QROPS ).

This article:

• sets out the changes which will be made
• provides guidance on how schemes should operate during the interim period before these regulations come into force
• highlights some further areas still under consideration

The regulations will be made shortly and, when introduced, will be effective from 6 April 2024. Under the circumstances set out in this newsletter, schemes should ensure that members are aware of the need for further legislative changes. As a result, members may need to wait until the regulations are in place before taking or transferring certain benefits. This is to ensure that their available allowances and tax position do not need to be revisited later in the year.

Transitional Arrangements — cancellation of a transitional tax-free amount certificate

A transitional tax-free amount certificate ( TTFAC ) may be revoked where it is found to be erroneous. If an relevant benefit crystallisation event ( RBCE ) has occurred before the revocation of the certificate, the March 2024 lifetime allowance guidance newsletter (see question 25) confirmed that previous RBCEs will be recalculated based on the actual transitional tax-free amounts. The individual may be liable to pay further tax. This remains the case.

However, where the revocation of a certificate reveals that the member should have had no lump sum allowance available, it is possible that previous payments were unauthorised. This includes where either:

• there has been a previous RBCE consisting of the payment of a pension commencement lump sum ( PCLS )
• a scheme has paid a trivial commutation lump sum ( TCLS ) or winding up lump sum ( WULS ) since 6 April 2024

The government will therefore bring forward legislation to provide that, under such circumstances, these lump sums will not be treated as unauthorised payments. They will however be fully taxable at the individual’s marginal rate.

Given the time required for a TTFAC to be issued and subsequently cancelled, we do not expect this issue to materialise before the amending legislation comes into force.

Transitional arrangements — PCLS and uncrystallised funds pension lump sum ( UFPLS ) after age 75

Currently, the payment of a PCLS or UFPLS after age 75 is not a benefit crystallisation event ( BCE ). This is because the individual’s remaining uncrystallised benefits would have been tested against the LTA at age 75. However, when applying for a TTFAC , paragraph 129(3) of Finance Act ( FA ) 2024 only considers lump sums which were paid as a BCE under Part 4 of FA 2004.

The government will therefore bring forward legislation to provide that the transitional tax-free amount considers any PCLS or (tax-free element of an) UFPLS paid after age 75. This will ensure that any TTFAC issued accurately reflects any tax-free lump sums received prior to 6 April 2024.

Schemes should ensure that this information is included in any TTFAC issued where relevant, as once the amending legislation comes into force and is applied retrospectively to 6 April 2024, any TTFAC issued which does not reflect these amounts will be incorrect.

Transitional arrangements — transitional tax-free amount certificates ( TTFACs ) and annual relevant benefit crystallisation event ( RBCE ) statements

Paragraph 125(5) of FA 2024 requires that RBCE statements, where an individual has a TTFAC in force, should show the actual amounts of lump sum allowance ( LSA ) and lump sum and death benefits allowance ( LSDBA ) used. The statement should no longer assume the standard transitional calculation. We are aware that there is no requirement on members to notify all their schemes that they are relying on a TTFAC . As a result, schemes may not be aware of this fact and may not be reporting correct information to members.

The government will therefore bring forward legislation to require individuals to notify their schemes (under which they have remaining rights) that they are relying on a TTFAC , and that schemes must only report the actual amounts of LSA and LSDBA used at the point at which they become aware that the member is relying on a TTFAC .

Given the time requirements to issue a response to a TTFAC , we do not expect this issue to materialise until the amending legislation comes into force. Where schemes should have been reporting actual amounts paid but have assumed the standard transitional calculation because they did not know a TTFAC was in force, HMRC recognises that schemes will have acted on the basis of the information available to them.

Transitional arrangements — applications for a TTFAC

The March 2024 lifetime allowance guidance newsletter (see question 24) confirmed that the current legislation only permits individuals to apply to a registered pension scheme of which they are a member. Where an individual has crystallised all their rights in the purchase of an annuity, this will mean that they or their legal personal representative cannot apply for a TTFAC . The government will therefore bring forward legislation to provide that applications may be made to an annuity provider.

Until this legislation is effective, it will remain the case that individuals can apply only to a registered pension scheme of which either:

• they are a member
• a deceased individual was a member immediately before their death

When the amending legislation comes into force, GOV.UK guidance will be updated to inform individuals that they may now also apply to an annuity provider.

Reporting requirements — provision of information between schemes

Lump sum death benefits paid from funds which crystallised prior to 6 April 2024 will not reduce an individual’s lump sum and death benefit allowance and will be tax-free ( see pension schemes newsletter 157 ). However, where a member transfers to a new provider, we are aware that there is no requirement for the scheme making the transfer to provide the receiving scheme with any information about how much of any funds crystallised before and after 6 April 2024. There government will therefore bring forward legislation to require schemes to exchange this information.

Although the reporting requirement will not be in force for 6 April 2024, because it will be retrospective to this date, as soon as they are able schemes should start to provide such information where relevant upon the transfer of rights to another provider.

Enhanced protection (EP) — transferring to a new provider

Pension scheme newsletter 157 confirmed that the government would bring forward legislation to provide that individuals with enhanced protection can transfer their pension savings to a new provider and carry over the benefit of their protection, even though their permitted maximums for a lump sum or lump sum death benefit currently operate on a per arrangement basis.

Until the amending legislation is effective, members with enhanced protection may wish to delay transferring to a new provider.

Enhanced protection (EP) and primary protection (PP) — protected lump sum rights of more than £375,000

Pension scheme newsletter 157 stated that the policy intent is for individuals with enhanced protection or primary protection and protected lump sum rights to be able to take a PCLS over their lump sum allowance of £375,000. It highlighted that HMRC is aware of the issue whereby paragraph 1(b) of Schedule 29 to FA 2004 prevents this and confirmed that the government would bring forward legislation to address this issue.

Until the amending legislation is effective, members may either:

• take a PCLS up to £375,000 — in this case the member would forgo their protected entitlement as any amount subsequently paid would not meet the conditions to be a PCLS
• delay to the payment of their PCLS in order that they can take their full entitlement — a PCLS can be paid 6 months before and up to 12 months after the member becomes entitled to it

Lump sum death benefits ( LSDBs ) — payments from funds which crystallised prior to 6 April 2024

Pension scheme newsletter 157 confirmed that the payment of a LSDB from funds which crystallised prior to 6 April 2024 may be limited by the permitted maximum. This is unintentional. The policy is that the payment of LSDBs from such funds are entirely tax-free. The government will therefore bring forward legislation to resolve this issue.

Until the amending legislation is effective, legal personal representatives may wish to delay requesting the payment of a lump sum death benefit where the payment would be made from funds which crystallised prior to 6 April 2024.

Consequential changes

The government will also bring forward legislation to address the following consequential changes:

• amend various references to benefit crystallisation events ( BCEs ) and to the LTA in The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (SI 2006/572)
• amend various cross-references within The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 to Chapter 15A Income Tax (Earnings and Pensions) Act 2003 ( ITEPA 2003 ) where these no longer align to the correct sections
• remove the reference to BCE 5 in The Registered Pension Schemes (Notice of Joint Liability for the Annual Allowance Charge) Regulations 2011 (SI 2011/1793)

Overseas transfer allowance ( OTA ) — benefits crystallised into drawdown

Regulation 4(12) of The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 provides that, where an individual has crystallised benefits prior to 6 April 2024, their OTA is reduced by 100% of their LTA previously-used amount. This would include any amount designated to drawdown. However, should these same funds designated to drawdown be transferred to a QROPS after 6 April 2024, they will again be deducted from the OTA . The government will therefore bring forward legislation to provide that such funds are not double counted against the OTA .

Until the legislation is effective, affected members may wish to defer their request to transfer rights held under a registered pension scheme to a QROPS .

Overseas transfer allowance — pre A-day benefits

Regulation 4(12) of The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 provides that, where an individual has crystallised benefits prior to 6 April 2024, their OTA is reduced by 100% of their LTA previously-used amount. However, unlike the transitional arrangements for the lump sum and death benefit allowance, there would be no deduction of benefits crystallised prior to 6 April 2006 where the member has not then had a BCE between this date and 5 April 2024. This is because paragraph 20 of Schedule 36 to FA 2004 does not apply to the OTA provisions. The government will therefore bring forward legislation to provide that the transitional reduction to a member’s OTA includes pre-A day pensions in payment.

Scheme-specific lump sum protection — calculating a member’s entitlement

Regulation 3 of The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 made changes to paragraph 24 of Schedule 36 to FA 2004. This provides the calculation for the additional lump sum amount where a member holds scheme-specific lump sum protection. We are aware that this formula double counts certain benefits and therefore does not operate as intended. The government will therefore bring forward legislation to resolve this issue.

Until this legislation is effective, affected members may wish to request a delay to the payment of a PCLS under scheme-specific lump sum protection.

Scheme-specific lump sum protection — reduction to an individual’s lump sum allowance

Pension scheme newsletter 157 confirmed that the government would bring forward legislation to provide that an individual’s lump sum allowance is reduced on the payment of a PCLS under scheme-specific lump sum protection by 25% of the total value of that lump sum plus the pension in connection with which it is paid.

Until this legislation is effective, given the technical error with the formula for calculating the additional lump sum amount, affected members may wish to request a delay to the payment of a PCLS under scheme-specific lump sum protection.

Scheme-specific lump sum protection — transferring providers

Article 23 of The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (SI 2006/572) further modifies the calculation for scheme-specific lump sum protection. This applies in circumstances where members have transferred to a new provider. The government will bring forward consequential legislative changes to amend this calculation in line with amendments to paragraph 34 of Schedule 36 to FA 2004.

Affected members should still be able to transfer their rights to a new provider before the amending legislation is effective. However, given the technical error with the formula for calculating the additional lump sum amount, they may wish to defer the payment of a  PCLS  under scheme-specific lump sum protection.

Financial Assistance Scheme ( FAS ) and Pension Protection Fund ( PPF )

Various regulations which provide for the tax treatment of lump sums paid by the FAS and the PPF point towards legislation which has been repealed or amended due to the abolition of the LTA .

The government will bring forward legislation to align the payment of lump sums by the FAS and the PPF with the new pension tax regime. In addition to consequential changes, amendments will be made to FAS and PPF regulations so that any lump sums which were tested against the LTA will be tested against either:

• the lump sum allowance
• both the lump sum allowance and lump sum and death benefit allowance

Any lump sums which required available LTA will require available lump sum allowance. These regulations will be retrospective to 6 April 2024.

Public service pensions remedy — impact of lifetime allowance abolition

The impact the abolition of the lifetime allowance ( LTA ) has on how the public service pensions remedy is implemented for a member depends on the scheme type and the status of the member.

Types of schemes

Chapter 1 schemes provide benefits for public service employees that are not provided under Chapter 2 or Chapter 3 schemes. 

Chapter 2 schemes provide benefits for judges.

Chapter 3 schemes provide benefits for local government employees.

Member status

A protected member is someone who remained in the legacy pension scheme throughout the remedy period until they were moved to the new scheme on 1 April 2022.

An unprotected member is someone who was moved to the new scheme on 1 April 2015.

A taper-protected member is a member who remained in the legacy scheme for part of the remedy period, moving to the new pension scheme before 1 April 2022.

Chapter 3 schemes

The remedy for these schemes is not retrospective for tax purposes. This means that if the amount of a pensioner member’s benefits changes as a result of the remedy, there is no change to the amount of LTA used up when the member’s benefits first crystallised. 

If a pensioner member’s benefits increase as a result of the remedy, this will be a new benefit entitlement for tax purposes. If this entitlement arose before 6 April 2024 the LTA rules in place at the point of that crystallisation will apply. Where the entitlement occurs on or after 6 April 2024, the benefit needs to be considered against the new rules. There will no longer be an LTA test when benefits are put into payment, but there is a limit on the amount an individual can take tax free. Whether or not a member can have a pension commencement lump sum ( PCLS ) will depend on if they have available lump sum allowance.

Where a member has put pension into payment before 6 April 2024 the scheme administrator will need to issue:

• annual benefit crystallisation event ( BCE ) statements in respect of tax years up to and including the tax year 2023 to 2024
• annual relevant benefit crystallisation event ( RBCE ) statements in respect of the tax years 2024 to 2025 onwards

If benefits are first put into payment on or after 6 April 2024, scheme administrators should follow the ‘business as usual’ processes for benefit payments from 6 April 2024. There are no special steps to take as a result of the remedy.

Chapter 1 schemes — deferred choice members

A deferred choice member is a member with pensionable service during the remedy period (remediable service) who has not taken benefits (or died) before 1 October 2023.

Deferred choice members should be given the option before they retire of taking new scheme benefits (make a new scheme benefits election under section 10 Public Service Pensions and Judicial Offices Act 2022 ( PSPJOA )) in relation to their service during the remedy period.

Benefits in payment — on or after 6 April 2024

Benefits in payment — before 6 april 2024.

Some members who retired shortly after the remedy was implemented in October 2023 may not have been offered that choice before their benefits started. These members must still be given the option to make a new scheme benefits election. That election would be made after their benefits have been put into payment but under section 11(3) PSPJOA , any new scheme benefits election takes effect from immediately before that member took benefits. This changes the amount of the member’s benefit entitlement from that point.

Where a deferred choice member who became entitled to benefits before 6 April 2024 makes a new scheme benefits election (or are treated as having made a new scheme benefits election under section 12 PSPJOA ), as the amount of their benefit entitlement has changed retrospectively, the amount of LTA used will also change.

For deferred choice members with benefits in payment before 6 April 2024, who made, or are treated as making, their benefit choice before their benefits started, scheme administrators will need to issue:

• a BCE statement in respect of the tax year 2023 to 2024
• annual RBCE statements in respect of the tax years 2024 to 2025 onwards

For a deferred choice member who, before 6 April 2024, became entitled to benefits and then made a new scheme benefits election, that was not implemented before that date, the scheme administrator will need to issue:

• a revised BCE statement in respect of the tax year 2023 to 2024 showing the revised percentage of standard LTA used

Where a member with enhanced protection or a form of fixed protection makes a new scheme benefits election after their benefits have started, a relevant benefit accrual test, or benefit accrual test will be needed to check if the member still has LTA protection. For members with a form of fixed protection, a benefit accrual test will also be needed when the member is rolled back to the legacy scheme to ensure that the member still has that form of fixed protection.

More details of the tax treatment of top-up benefit payments or benefit overpayments can be found in this newsletter.

Chapter 1 and Chapter 2 schemes — immediate choice members

Members of a Chapter 1 scheme with remediable service who started benefits before 1 October 2023, or died before that date, are classed as ‘immediate choice’ members. 

The pension scheme manager will give the member, or their beneficiary, a remediable service statement. They will then make a choice between legacy scheme benefits or new scheme benefits in respect of the period of remediable service. Whether the amount of the member’s benefit entitlement changes, and the date of that change, depends on the type of member (protected, taper protected or unprotected) and the choice made. 

The amount of the member’s benefit entitlement will not change for:

• a protected member who chooses legacy benefits
• an unprotected member who makes a new scheme benefits election

For taper-protected members and unprotected members who choose legacy benefits the amount of their benefit entitlement will change, and they are treated as always having been entitled to that amount of benefit.

The amount of the benefit entitlement will change for a protected member or taper-protected member who makes a new scheme benefit election. The member’s entitlement will change from the time immediately before they started their pension. For a member who dies before drawing benefits the change takes place immediately before the member’s death.

For Chapter 2 schemes, judges with remediable service have been given an immediate choice between benefits under an unregistered judicial legacy pension scheme or a registered judicial 2015 scheme for the remedy period. Whatever choice is made by, or in respect of, a judge, the benefits will be treated as always having accrued on the chosen basis.

The amount of a judge’s benefit entitlement under a registered pension scheme will change for:

• tapered protected members
• unprotected members for whom a legacy scheme election is made

No change in benefit entitlement

If a member’s benefit entitlement does not change there is no specific public service pension remedy action needed. Scheme administrators should issue:

• annual BCE statements up to and including in respect of the tax year 2023 to 2024

Change in benefit entitlement

Where a member’s benefit entitlement changes, the amount of the LTA used up by the benefit crystallisation will need to be recalculated. Where a member with enhanced protection or a form of fixed protection makes a new scheme benefits election, a relevant benefit accrual test, or benefit accrual test will be needed to check if the member still has LTA protection. For Chapter 1 members with a form of fixed protection, a benefit accrual test will also be needed when the member is rolled back to the legacy scheme to ensure that the member still has that form of fixed protection.

Scheme administrators should issue:

• revised BCE statements showing the revised percentage of standard LTA used for the tax yeas up to and including 2023 to 2024
• where the amount of any LTA charge has changed (or an LTA charge is now due), a revised (or new) statement under regulation 12 SI 2006/567 ( see PTM164300 ) showing the amount of the revised or new LTA charge
• annual RBCE statements in respect of the tax years 2024 to 2025 onwards — if the member’s choice is not implemented until 2025 to 2026 or later, the annual RBCE certificate will also need to be revised to show the correct amount of lump sum allowance and lump sum and death benefit allowance used

Tax treatment of top-up benefit payments and impact on allowances

This advice applies to top-up payments to benefits a member became entitled to before 6 April 2024.

The payment of a top-up lump sum to the member is not an RBCE for the purposes of either section 637Q or 637S ITEPA 2003 .

How a top-up lump sum is authorised and taxed depends on the circumstances in which it is paid.

Top-up lump sum paid to member on or after 6 April 2024 intended to be a PCLS

If the additional lump sum is paid to the member within 12 months of becoming entitled to the original PCLS , the payment is considered against the standard PCLS payment conditions set out at paragraph 1 of Schedule 29 Finance Act ( FA ) 2004. 

If the additional lump sum paid to the member is not paid within 12 months of becoming entitled to the original PCLS , where the payment meets the conditions of regulation 18 SI 2023/113, the top-up lump sum payment is a PCLS . 

For both situations the action of paragraph 130A of Schedule 9 FA 2024 (inserted by regulation 4(21) SI 2024/356) means that:

• the payment is a BCE 6 — the date of the BCE is when the member became entitled to it in accordance with section 166(2)(a) FA 2004 (that is the same date the member became entitled to the first PCLS payment)
• the maximum amount of the PCLS depends on the member’s available LTA
• the payment is tax-free in accordance with section 636A ITEPA 2003
• the payment reduces the amount of the member’s available lump sum allowance ( LSA ) and lump sum and death benefit allowance ( LSDBA ) in accordance with paragraphs 125 and 126 of Schedule 9 FA 2024
• if a member applies for a transitional tax-free amount certificate, they will need to provide complete evidence of both the original and top-up lump sum payments

Top-up lump sum paid on or after 6 April 2024, and after member’s death, intended to be a PCLS

Regulation 24 SI 2023/113 sets the conditions where a top-up payment to a PCLS is paid following the member’s death may be an authorised payment. It provided for the top-up lump sum to get similar tax treatment to the top-up PCLS paid during the member’s lifetime.

Following the abolition of the LTA , this regulation no longer gives this tax treatment.

The government will bring forward further regulations to ensure that where the top-up lump sum would have been a PCLS if it had been paid to the member in their lifetime:

• it is to be treated as a PCLS paid to a member of a registered pension scheme
• the top-up lump sum is a BCE 6 that occurs on the same date as the BCE for the original PCLS paid to the member
• the amount crystallised is the amount of the payment

Top-up lump sum paid to member on or after 6 April 2024 intended to be an LTA excess lump sum

Paragraph 130A of Schedule 9 FA 2024 provides that where a member became entitled to a lump sum before 6 April 2024, but it is not paid until on or after that date:

• the pre-6 April 2024 legislative conditions will apply when considering if a payment is authorised under the lump sum rule (section 166 FA 2004)
• the tax treatment provided for by amendments made by Schedule 9 FA 2024 is ignored

In short the payment receives the tax treatment that is would have had before 6 April 2024. This means that:

• the payment is a BCE 6 — the date of the BCE is when the member became entitled to it in accordance with section 166(2)(b) FA 2004 — due to the retrospective nature of the remedy this means the same date the member became entitled to their pension, as the payment forms part of that benefit payment package
• where that BCE occurred before 6 April 2023 the payment is subject the LTA charge
• the payment reduces the amount of the member’s available LSA and LSDBA where the standard transitional calculation is used under paragraphs 125 and 126 of Schedule 9 FA 2024

Top-up lump sum paid to member on or after 6 April 2024 intended to be a serious ill-health lump sum ( SIHLS )

Regulation 22 SI 2023/113 sets the conditions where a top-up payment to a serious ill-health lump sum ( SIHLS ) is authorised. Where those conditions are met the top-up lump sum payment is treated as a SIHLS .

The action of paragraph 130A of Schedule 9 FA 2024 together with the retrospective nature of the remedy, means that:

• the payment is a BCE 6 — the date of the BCE is when the member became entitled to it in accordance with section 166(2)(b) FA 2004 (this will be the same date that the member became entitled to the original SIHLS payment)
• where that BCE occurred before 6 April 2023 any excess above the member’s available LTA is subject the LTA charge
• the payment reduces the amount of the member’s available LSA and LSDBA in accordance with paragraphs 125 and 126 of Schedule 9 FA 2024
• if a member applies for a transitional tax-free amount certificate, the evidence they provide to the relevant scheme administrator should show both the original and top-up lump sum payments

Top-up lump sum paid on or after 6 April 2024, and after member’s death, intended to be a SIHLS

Regulation 26 SI 2023/113 sets the conditions where a top-up payment to a serious ill-health lump sum ( SIHLS ) is authorised. Where those conditions are met the top-up lump sum payment is treated as a SIHLS paid to the member. This means that:

• if the member’s personal representative applies for a transitional tax-free amount certificate, the evidence they provide to the relevant scheme administrator should show both the original and top-up lump sum payments

Top-up lump sum paid to member on or after 6 April 2024 intended to be a trivial commutation lump sum ( TCLS ) or small pots lump sum

Regulation 20 SI 2023/113 sets the conditions where a top-up payment to a TCLS is authorised. Where those conditions are met the top-up lump sum payment is treated as a trivial commutation lump sum.

Top-up payments for small pots lump sum should be able to be authorised under the conditions set by Regulation 12 SI 2009/1171.

Becoming entitled to, and payment of, these lump sums is not a BCE , and it will not be an RBCE . The payments do not use up LTA , LSA or LSDBA .

Top-up lump sum paid on or after 6 April 2024, and after member’s death, intended to be a TCLS or small pots lump sum

Regulation 25 SI 2023/113 sets the conditions where a top-up payment to a TCLS paid following the member’s death is authorised. Where those conditions are met the top-up lump sum payment is treated as a TCLS .

Regulation 9 SI 2023/912 sets the conditions where a top-up payment to a small pots lump sum paid following the member’s death is authorised. Where those conditions are met the top-up lump sum payment is treated as a TCLS for the purposes of Part 9 of ITEPA 2003 .

Becoming entitled to, and payment of, these lump sums is not a BCE , and it will not be an RBCE . The payments do not use up LTA , LSA or LSDBA .

Top-up to a defined benefits lump sum death benefit ( DBLSDB )

Regulation 31 SI 2023/113 makes provision for the taxation of top-up payments to a defined benefits lump sum death benefit ( DBLSDB ). The intention was that the top-up payment would get the same tax treatment as the original DBLSDB .

The amendments to FA 2004 and ITEPA 2003 made by Schedule 9 FA 2024 mean that regulation 31 will no longer operate as intended. Where a top-up payment is made on or after 6 April 2024 more than 2 years after either the member’s death, or when the scheme could reasonably be aware of the member’s death (the relevant 2 year period), the payment will be taxable.

Regulations will be made so that the top-up DBLSDB payments made outside the relevant 2 year period will receive similar tax treatment to the original DBLSDB payment. HMRC will be consulting with public service pension scheme administrators about this.

Tax treatment of benefit over payments and impact on allowances

As a result of the immediate benefit choice made by, or on behalf of, the member the amount of their scheme pension or lump sum entitlement may go down. Similarly, the amount of death benefit payable to a beneficiary may reduce. Schemes can require members, or beneficiaries, to repay the overpaid benefits. Repaying overpaid benefits may change the amount of LTA used.

Overpaid scheme pension

The amount of the BCE 2 in respect of that pension will be based on the annual amount of the reduced scheme pension. This is the amount that should be used in the standard transitional calculation of the member’s LSA and LSDBA under paragraphs 125 and 126 of Schedule 9 FA 2024. The fact that regulation 28 SI 2023/113 authorises the overpaid scheme pension does not alter the amount of LTA used under BCE 2.

Overpaid pension commencement lump sum ( PCLS )

Where a member has received an overpaid PCLS , the amount of their LTA used up (and so available LSA and LSDBA ) will depend on whether the member repays any overpaid PCLS .

Under regulation 30 SI 2023/113 when the member has completed repaying the required amount to the scheme, the amount of the BCE 6 is reduced by the amount of the overpaid lump sum.

If the member has not repaid the scheme in full at the time of the first RBCE , the overpaid PCLS is included in the amount of LTA used up, and in the paragraph 125 and 126 (Schedule 9 FA 2024) calculation of the member’s available LSA and LSDBA .

If the member has repaid the lump sum in full at the time of the first RBCE , do not include the overpaid amount in the calculation of the member’s available LSA and LSDBA .

If a member has applied for and received a transitional tax-free amount certificate, and then later repays the lump sum in full, this will mean that the information on that certificate is no longer correct.

Overpaid DBLSDB

If a beneficiary has received too much DBLSDB as a result of the remedy, the scheme can ask the beneficiary for the overpaid lump sum to be repaid.

If an RBCE occurs in respect of a deceased member who had remediable service, how their available LSDBA is calculated depends on if the overpaid DBLSDB has been repaid.

Under regulation 15 SI 2023/912 when the beneficiary completes repaying the scheme, the amount of the BCE 7 is reduced by the amount of the overpaid DBLSDB .

If the RBCE occurs before the beneficiary has repaid all the lump sum to the scheme, the amount of the overpaid DBLSDB is included in the calculation of the member’s available LSDBA in accordance with paragraph 126 Schedule 9 FA 2024.

If the first RBCE occurs after the beneficiary has repaid the lump sum in full, do not include the overpaid amount in the calculation of the member’s available LSDBA .

Member action on receipt of a revised BCE or RBCE certificate

Members should give a copy of a revised BCE certificate to any scheme under which they had a BCE or RBCE after the public service pension scheme BCE .

The other scheme will need to reconsider the status of the payments made by their scheme and the LTA usage (or LSA and LSDBA usage for benefits crystallised on or after 6 April 2024). For example, if benefits provided under a public service scheme increase this could mean that part or all a lump sum paid by the later scheme that was intended to be a PCLS may no longer be a PCLS .

Transitional tax-free amount — all scheme types

A transitional tax-free amount certificate cannot be issued after an RBCE has occurred.

A member’s choice under the remedy can change the amount of the benefit they have already become entitled to. Where the amount of the member’s benefit entitlement has increased, the public service pension scheme will then need to make payments to top up the member’s benefits to the correct level. 

Top-up payments made to the member on or after 6 April 2024 are not RBCEs . The member does not need to apply for a transitional tax-free amount certificate before these payments are made.

However, a public service pension scheme member with remediable service who crystallised benefits before 6 April 2024 and who wants a transitional tax-free amount certificate will need to apply before:

• further benefits that include lump sums are crystallised under the scheme, for example a partial retiree takes full retirement after 5 April 2024
• benefits, that include lump sums, are put into payment under another registered pension scheme,

Becoming entitled to these benefits may be RBCEs .

Because of the retrospective nature of the public service pensions remedy, scheme administrators may need to make further enquiries before issuing a certificate in respect of a public service pension scheme member who has remediable service. This is to ensure that they have been given complete evidence and that the certificate gives the correct figures.

Where the evidence provided indicates that benefits under a public service pension scheme that is a Chapter 1 or Chapter 2 scheme started payment in tax years 2015 to 2016 onwards, scheme administrators will need to know:

• if the member is impacted by the public service pension remedy
• if the member is affected by the remedy, whether the evidence provided shows the correct position after the member has made their choice under the remedy — scheme administrators cannot rely on the fact that an impacted member first took benefits on or after 1 October 2023 to have been given the correct benefits under the remedy

If an impacted member has not been offered a choice, or their choice has not yet been implemented, scheme administrators cannot be certain that the evidence provided shows the correct amount of pre-6 April 2024 lump sums.

The legacy pension schemes in respect of police and firefighters are unusual in that they allow for lump sum to be paid at retirement that are more than the maximum PCLS . Members of these schemes often take the maximum sum, part of which will be an unauthorised payment and so should not be included in the calculation of available LSA and LSDBA .

Where a PCLS has been overpaid this must be included in the lump sum transitional tax-free amount and the lump sum and death benefit transitional tax-free amount, unless the member has repaid the scheme in full. 

Paying only part of the amount the scheme requires to be repaid will not reduce the amount of the lump sum transitional tax-free amount and the lump sum and death benefit transitional tax-free amount.

If the overpaid amount is later repaid in full to the scheme this will reduce the lump sum transitional tax-free amount and the lump sum and death benefit transitional tax-free amount. The figures shown on the transitional tax-free amount certificate will now be incorrect; they will overstate the member’s position. If there has been an RBCE in respect of the member the certificate should be revoked. 

Where a DBLSB has been overpaid this must be included in the lump sum and death benefit transitional tax-free amount, unless the beneficiary has repaid the scheme in full.

Paying only part of the amount the scheme requires to repaid will not reduce the amount of the lump sum and death benefit transitional tax-free amount.

If the overpaid amount is later repaid in full to the scheme this will reduce the lump sum and death benefit transitional tax-free amount. The figure shown on the transitional tax-free lump sum will now be incorrect; it will overstate the member’s position.

Where a member is given a transitional tax-free amount certificate, they should give a copy of that certificate to the schemes they have taken benefits from. This will enable the scheme administrator of those schemes to provide annual RBCE statement on the basis of lump sum actually paid from that scheme rather than on the basis of LTA used under that scheme. When taking further benefits at a later date, it will also help scheme administrators if the information members provide before putting benefits into payment is in one form rather than a mixture of LSA , LSDBA and LTA information.

Fixed protection 2016 and individual protection 2016 application deadlines

Paragraph 93(5) Schedule 9 FA 2024 has the effect of putting a deadline of 5 April 2025 for making an application for either fixed protection 2016 or individual protection 2016.

Regulations will be made to extend the deadline for making an application until 5 April 2027 for individuals who have remediable service.

If as a result of the remedy the value of a member’s total pension rights on 5 April 2016 is more than £1 million they can apply for protection. 

Once protection has been applied for, and granted, the amount of the protection can be amended. For example, a deferred choice member had total pension rights of £1.05 million (based on legacy accrual) and received individual protection 2016 on that basis. In 2029 that member makes a new scheme benefits election which increases that value of their pension rights as at 5 April 2016 to £1.1 million. The member can tell HMRC about the revised values of their pension rights and their individual protection 2016 will be changed accordingly.

Paying the LTA charge

Where a choice by, or in respect of a member, retrospectively increases the member’s benefit entitlement a new or increased LTA charge may arise. Scheme administrators should report any increases .

Although the LTA has been abolished from 6 April 2024, scheme administrators will still be able to report new or increased LTA charges using the Accounting for Tax (AFT) return.

Pension remedies for MPs , MSs and members of the Northern Ireland Legislative Assembly — tax treatment of annual allowance and lifetime allowance

As part of reforms to the Parliamentary Contributory Pension Fund ( PCPF ) in 2015 to 2016 and the Members of the Senedd Pension Scheme (the Senedd scheme) in 2016 to 2017, MPs and MSs were moved from final salary benefits to Career Average Revalued Earnings ( CARE ) benefits.

The change from the final salary to the CARE benefits included protections which followed similar principles to the wider 2015 public service pension reforms, which were subsequently found at the Court of Appeal to be discriminatory on the basis of age. The government introduced legislation to remedy this discrimination in public service pension schemes in 2022. The Independent Parliamentary Standards Authority ( IPSA ) and the Senedd Commission intend to implement a similar remedy to the government’s remedy to the discrimination in the reforms to public service pension schemes.

As a result of the remedy being implemented by IPSA and Senedd, the government will introduce regulations in the 2024 to 2025 tax year to provide for the tax consequences relating to a member’s pension benefits where a member makes a choice for different benefits. The tax regulations will apply only to members who make a choice for different benefits and will apply from the 6 April 2024. Where a member retains their existing benefits, they will undertake the standard tax calculations (as normal).

The following guidance will provide members with the required information on what will be included within the tax regulations prior to making a decision.

From 6th April 2024, the government understand that IPSA intend to provide all MPs with the option of which arrangement they would like their benefits to be calculated under during the remedy period (8 May 2015 to 31 March 2023).

Unlike the mainstream remedy, the immediate choice for MPs and their personal representatives is not retrospective. This means there is no change in the annual allowance ( AA ) or lifetime allowance ( LTA ) position for the tax years falling within the remedy period. Instead, if a member chooses to change their benefits for the remedy period from CARE to final salary or vice versa, their benefit entitlement will change in the tax year they make their choice (2024 to 2025). This will impact on the members AA position and in specific circumstances what would have been their LTA position in 2024 to 2025.

From 6 April 2024, the government understand the Senedd Commission will provide MSs who were under 55 on 1 April 2012 the option of how they would like their benefits to be calculated in respect of the remedy period (6 May 2015 2016 to 6 May 2021). This immediate choice for MSs and their personal representatives is not retrospective, which also means there is no change in the AA or LTA position for tax years falling within the remedy period. Instead, if a member chooses to change their benefits for the remedy period from CARE to final salary or vice versa, their benefit entitlement will change in the tax year they make their choice (2024 to 2025). This will impact on the members AA position and in specific circumstances what would have been their LTA position in 2024 to 2025.

Northern Ireland and Scotland

Members of the Legislative Assembly of Northern Ireland also underwent pension reforms in 2016, which included transitional protections. Further detail on the tax treatments for these members will be provided once their remedy has been put in place.

The Scottish Parliamentary Pension Scheme did not undergo any changes similar to the 2015 and 2016 reforms in other parliamentary pension schemes and therefore no remedy is required in relation to this scheme.

Annual allowance ( AA )

The members AA position for the remedy years will not change. Where a member chooses a different form of benefits the tax regulations will modify how their pension input amount ( PIA ) under the scheme for the year they make their choice (2024 to 2025) is calculated where the finals salary and CARE benefits are held under separate arrangements. This may give rise to a tax charge that would not have arisen if their chosen benefits had arisen in each of the relevant tax years.

The PCPF contains a CARE and final salary section which are separate arrangements. A member’s PIA for a tax year is the total of the PIAs for each pension arrangement that individual belongs to. Where the final salary and CARE benefits are held under separate arrangements, this means the PIA must be calculated separately for the final salary arrangement and the CARE arrangement. Both arrangements are classified as defined benefits arrangements.  PTM053301 explains how to calculate the PIA for a defined benefits arrangement . Broadly the PIA is the difference between the value of the member’s pension rights under the arrangement at the end of the year (the closing value) and the value of those rights at the start of the year (the opening value). A PIA for an arrangement cannot be less than £0.

Where a member makes a choice for different benefits during the remedy period and they have a large increase in pension savings in their chosen arrangement, they will have a large decrease in the other pension arrangement. Where the final salary and CARE pension arrangements are separate, a decrease in the value of pension rights in one arrangement cannot offset the one-off increase in the value of rights under the other arrangement. This can lead to a tax charge that would not occur if the increase for each tax year had arisen in the related year.

Where a member makes a choice for different pension benefits which are held under a separate arrangement, the calculation of the member’s PIA for those arrangements for the year they make their choice will be through a 2-stage process. These changes will only apply in relation to the tax year the member makes their choice. The normal rules for calculating the PIA will apply in later tax years.

There will also be special rules applying to pensioner members who choose a different form of benefits.

Step 1 — calculate the PIA for ordinary benefit accrual in the year ( MPs only)

The closing value for both the final salary and CARE arrangements is calculated on the basis that the member’s choice has been implemented. 

To reflect the fact that the basis of calculating the member’s pension entitlement is changing, the opening value will be calculated as if the member’s choice had been implemented. This revised opening value will be used to calculate the member’s PIA for the arrangement using the normal methodology. For the avoidance of doubt, this includes uprating each opening value by the relevant consumer price index rate as usual.

For example, if a member of PCPF moved from CARE benefits to final salary benefits in respect of the remedy period (ending 31 March 2023), the PIA calculations for 2024 to 2025 would be:

• CARE opening value based on pension rights as at 5 April 2024 (this includes rights accrued from 1 April 2023 to 5 April 2024)
• CARE closing value based on pension rights as at 5 April 2025 (this includes rights accrued from 1 April 2023 to 5 April 2025)
• final salary opening value based on pension rights as at 5 April 2024 (this includes rights accrued from entry into this arrangement to 5 April 2024)
• final salary closing value based on pension rights as at 5 April 2025 (this includes rights accrued from entry into this arrangement to 5 April 2025)

As the opening and closing values will reflect the PIA had the member always been within their chosen arrangement, it ensures the PIA measures the pension savings all members have built up in the year, and prevents a one off spike in the PIA as a result of the scheme’s remedy. This also ensures the member’s opening value under each arrangement for the next tax year to reflect the correct position, to enable the standard method of calculating the member’s PIA going forward.

Step 2 — increase in PIA as a result of the member’s choice ( MPs only)

Where a member’s choice leads to an overall decrease in benefits under the scheme, the member’s PIA within step 2 will be ‘nil’. 

Where a member’s choice leads to an overall increase in benefits (across both their CARE and final salary arrangements), the increase in benefits will be brought into the member’s PIA for the year the member makes their choice. This is to ensure that the increase in benefits which members receive as a result of their options exercise is within the AA system.

This is found by:

The total of the value of the member’s pension rights under the CARE and final salary arrangements at the end of the year in which the member makes their choice calculated on the basis of the member’s choice.

The total of the value of the member’s pension rights under the CARE and final salary arrangements at the end of the year in which the member makes their choice calculated on the basis that the member did not choose to change benefits.

This amount is then multiplied by the usual factor of 16 to give the PIA for step 2.

For example, an MP had been accruing benefits under the final salary arrangement at a rate of 1/40 pensionable pay. That MP was moved to the CARE section in 2015. In 2024 to 2025 under the PCPF options exercise that MP chooses to have final salary benefits in respect of the remedy period.

The calculation is based around the following:

Value of the member’s CARE pension for the period 1 April 2023 to 5 April 2025 (for example, £3,500pa), plus the value of the member’s final salary pension as at 5 April 2025 based on pensionable service to 31 March 2023 (for example, £26,000pa)

Value of the member’s CARE pension for the period 8 May 2015 to 5 April 2025 (say £15,000pa), plus the value of the member’s final salary pension as at 5 April 2025 based on pensionable service to 7 May 2015 (say £10,000pa)

So (£3,500 + £26,000) – (£15,000 + £10,000) = £4,500

The PIA for step 2 is £72,000 (£4,500 × 16)

Retired members ( MPs and MSs )

Under the normal application of the tax rules if an individual has fully retired, they do not have a PIA under that scheme. As the remedy for PCPF and the Senedd scheme is not retrospective, any increase in benefits as a result of the members choice will not be measured against the AA . This could result in these members being in an advantageous position.

Tax regulations will provide that if a pensioner member chooses a different form of benefits, they will have a PIA under the scheme for the tax year that they make their choice. This will be calculated in accordance with step 2.

The availability of carry forward to use against this PIA will also be restricted.

So, if a retired member’s choice results in them having an AA charge, they will be required to report and pay this through Self Assessment, as is normal when an AA charge arises.

Member’s PIA for the scheme as a result of choosing different benefits

The member’s PIA under the scheme is the total of the PIA for each arrangement. There may be other arrangements under the scheme, for example PCPF has separate arrangement for pension ministerial service.

Where an active or deferred MP chooses a different form of benefits in the tax year that choice takes effect, the member’s PIA under the scheme will be the total of:

• step 1 PIA for CARE arrangement
• step 1 PIA for final salary arrangement
• the PIA for every other pension arrangement the individual has under the scheme

Where a retired MP or MS chooses a different form of benefits, in the tax year that choice takes effect the member’s PIA under the scheme will be the total of step 2.

For active and deferred MSs , their total PIA will be calculated as normal where their pension rights are held under a single arrangement.

Pension saving statements ( PSS )

The normal rules for providing a PSS either automatically, or upon the request of the member, will apply. As for any other tax year, the member will be able to use the information provided along with their PIAs from other pension schemes they are a member of, to calculate their AA position. If the member has an AA charge, they should report this as normal through Self Assessment. Members will also be able to utilise the scheme pays process as normal.

Lifetime allowance ( LTA ) ( MPs and MSs )

As the remedy is not retrospective, the entitlement to increased benefits will arise following the abolition of the LTA . This means some members not being subject to a tax charge which they would have been subject to if the increase in benefits had been retrospective.

To prevent these members receiving a tax windfall, a special one-off tax charge will apply in respect of any member who makes a choice for higher benefits and had a BCE in the period 6 April 2020 to 5 April 2023. The person subject to the tax charge will be the scheme administrator. The amount of the tax charge will be 25% of the value of the increase in pension rights (calculated in accordance with the rules in place before 6 April 2024). The scheme administrator will adjust the member’s benefits to account for that tax charge, in the same way a member’s benefits would be adjusted as the result of the scheme administrator paying an LTA charge.

The members LTA position within the remedy years will not change. If the amount of this tax charge is more than the amount of the LTA charge the member would have been subject to if the LTA charge had still been in place, HMRC’s understanding is that member can apply to the scheme for a redress payment.

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Carers threatened with prosecution over minor breaches of UK benefit rules

DWP is forcing tens of thousands of people looking after relatives to repay huge sums after buildup of erroneous overpayments

• Analysis: Why are so many carers being taken to court?
• Explainer: Who are the unpaid carers?
• ‘DWP are the real criminals’: carer in tatters after ‘brutal’ fraud prosecution

Tens of thousands of unpaid carers looking after disabled, frail or ill relatives are being forced to repay huge sums to the government and threatened with criminal prosecution after unwittingly breaching earnings rules by just a few pounds a week.

People who claim the £81.90-a-week carer’s allowance for looking after loved ones while working part-time are being forced by the Department for Work and Pensions (DWP) to pay back money that has been erroneously overpaid to them, in some cases running to more than £20,000, or risk going to prison.

The repayments, which mainly hit carers on low incomes, have been criticised as a draconian response to mostly minor earnings rules infringements caused by DWP oversights, and what MPs have called “honest mistakes” by claimants confused by an opaque and complex system.

MPs and charities have called for an urgent overhaul of the carer’s allowance, saying it was wrong that carers who devoted their lives to looking after loved ones, saving the UK billions of pounds and helping prop up the NHS and care system, were being treated like fraudsters for mostly inadvertent errors.

Ed Davey, the Liberal Democrat leader, said: “Most unpaid carers struggle financially, and for many it takes a toll on their mental and physical health too. The truth is, unpaid family carers underpin our entire care sector, and help to keep the NHS on its feet too. The government should value and support carers, not treat them like criminals.”

The carer’s allowance is paid to those who provide at least 35 hours of unpaid care a week, giving up large portions of their lives to look after, in most cases, disabled, sick or frail relatives.

Those in receipt of the benefit are allowed to have a second income from a job, but there are strict government limits on how much they can earn – currently £151 a week.

If a carer’s income rises above that level, through working a few extra hours, or even a pay rise, they forfeit the entire benefit, an “overpayment” that the DWP seeks to recover, often by any means possible.

The problem is compounded by the fact that the DWP has IT systems that flag when a carer’s income breaches the threshold, but fails in many cases to act on the information, allowing carers to rack up thousands of pounds’ worth of overpayments over months and years before, in some cases, pursuing them in the courts for benefit fraud.

The severity of the DWP’s approach was highlighted last week when it went to court to seize a £16,000 inheritance belonging to a former unpaid carer and part-time supermarket worker, Vivienne Groom, months after it successfully prosecuted her for benefit fraud relating to breaches of earnings rules.

Groom had agreed to repay in instalments £16,000 relating to earnings breaches incurred between 2014 and 2019. The DWP used proceeds-of-crime laws – normally used to seize cars, cash and properties owned by convicted major criminals – to take the bequest, which had been left to her by the mother she dedicated so much of her life to caring for.

In another case, shared with the Guardian, an unpaid carer with a part-time charity job who unknowingly breached the threshold by an average of £4.40 a week and £58 in total – a breach caused by the automatic uprating of the national minimum wage – was told to repay £1,715 in “overpayments”, including a £50 civil penalty.

In a third case, a mother and part-time bookkeeper who cared for her autistic child received a £5,200 demand. When she appealed and supplied detailed accounts to support her case, she said the DWP disallowed an expense claim for a work laptop, ensuring she breached earnings rules and was liable for a repayment penalty.

Despite ministers promising five years ago that data-matching technology would largely eliminate overpayments, official figures show they are still a big headache. In 2022-23, 26,700 carers were asked to repay sums relating to earnings breaches. More than 800 were repaying sums between £5,000 and £20,000, and 36 were repaying more than £20,000.

Stephen Timms, the Labour chair of the Commons work and pensions committee, which heavily criticised DWP failings after investigating carer’s allowance overpayments five years ago, said the continuing scale of the problem was deeply disappointing. “It should not be happening,” he said.

The 2019 inquiry by MPs concluded that the vast majority of earnings-related overpayments were down to “honest mistakes” by carers, while administrative failures by the DWP meant the errors were not picked up before they spiralled into huge overpayments. It said the design of the benefit “sets carers up for a fall” and urged ministers to do more to limit the risk to claimants.

The repayments build up rapidly because even if the weekly earnings limit is exceeded by as little as £1, claimants become automatically ineligible for the entire carer’s allowance. This results in a “cliff edge” repayment penalty unmatched in its severity in the benefits system.

Campaigners say the DWP’s failure to investigate thousands of potential earnings breaches identified by its own data-matching technology each month means infringements that could have been spotted and corrected within weeks are allowed to accumulate unchecked for months, and sometimes years.

Emily Holzhausen, the director of policy and public affairs at the charity Carers UK, said: “The whole DWP system surrounding the carer’s allowance earnings limit needs sorting out urgently, with the level of the earnings limit increased and processes modernised, digitised and reformed.”

The DWP insists claimants are at fault for failing to tell carer’s allowance unit officials their earnings have changed. A spokesperson for the department said: “We carefully balance our duty to the taxpayer to recover overpayments, and safeguards are in place to manage repayments fairly. Claimants have a responsibility to ensure they are entitled to benefits and to inform the DWP of any changes in their circumstances that could impact their award.”

There are 5 million unpaid carers in the UK, of whom nearly 1 million claim the carer’s allowance..

Many unpaid carers give up work or go part-time when they look after partners or relatives. An estimated 44% of people on carer’s allowance are in poverty. In most cases, repayments are deducted monthly from benefits or wages, meaning claimants can be paying off debts for years.

Charities say the impact on carers forced to repay huge sums is devastating. “The cases are heart-rending. They talk about being deeply shocked, very negative impacts on their mental health, and struggling financially whilst still continuing to provide significant amounts of care,” said Holzhausen.

More on this story

Fined £6,000 for tiny mistake: carer penalised for extra shift at supermarket

Iain Duncan Smith urges ministers to pause carers’ fines

Why are so many carers being taken to court for benefit fraud?

Calls to end ‘persecution’ of carers over UK benefits rule breaches

Who are unpaid carers, and why have some had to repay large sums to UK government?

The Guardian view on carer’s allowance: people who look after others should not be an afterthought

Lease electric cars to rural care workers, UK climate charity says

Young carers in England and Wales ‘forced out of education’ by benefit rules

Carers in the UK: have you been threatened with prosecution for benefit fraud?

Modern slavery in social care surging since visa rules eased

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