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Expense payments and tax relief

If your employer has reimbursed you for expenses you incurred in carrying out your job - such as the cost of professional subscriptions or the use of your home telephone - you will have to pay tax on the payments you have received.

However, you may also be able to get tax relief for your expenses - this has the effect of cancelling out the tax you are due to pay.

Both the expense payments and any tax relief you're due will show on your PAYE Coding Notice - as described below.

Expenses entries on your PAYE Coding Notice

Expense payments

The expense payments appear in the section on your PAYE Coding Notice called 'Items that reduce your tax-free amount' - under the headings 'Taxable expenses payments' and 'Telephone'.

Tax relief on expenses

Any tax relief you get on expense payments will show in the area called 'Allowances and reliefs'. Typical entries might include:

• 'flat rate job expenses'
• 'job expenses'
• 'professional subscriptions'

Expense payments and tax relief - example

You've paid professional subscriptions of £210 to an approved organisation. You have to belong to this organisation for your job so your employer reimburses you the money:

• your total allowances and reliefs are £8,315 - made up of your Personal Allowance of £8,105 (the amount for the 2012-13 tax year) plus tax relief of £210 for your 'professional subscriptions'
• your total 'deductions' (amounts which reduce your tax-free pay because they count as taxable income) are £210 - made up of your 'Taxable expenses payment' which is the amount your employer has reimbursed you for your professional subscriptions
• your total tax-free amount is £8,105 - the same as it would have been if you hadn't had the expense payments and tax relief in the first place

So, you have tax-free income of £8,105 and your tax code is 810L.

• Tax allowances and reliefs - employees or directors

• Understanding your PAYE Coding Notice

• Check Income Tax allowances and rates for the tax year 2012-13 Opens new window

More useful links

• Company benefits in your tax code

• What to do if your tax code is wrong

• Tax codes - the basics

Useful contacts

• Money, tax and benefits contacts

• National Insurance Contributions Office