Tax ExemptionsTypes of Military Tax Exemptions

Payments for Food and Drink

Payments made instead of food and drink normally supplied to members of the armed forces (ITEPA 2003 s.297) (EIM50100).

Mess Expenses

A contribution to mess expenses are tax exempt (ITEPA 2003 s.297) (EIM50100).

Laundry

FREs for laundering uniform are given by way of a payroll adjustment. Army, RAF and Marines = £100, Navy = £80 (EIM50125).

Tax Refunds for Travel and Expenses

• Tax refunds for travel and other expenses are claimed under the following legislation: Income Tax (Earnings and Pensions) Act 2003, sections 336-339. Click here to read the legislation in full.
• Serving or ex-Armed Forces personnel can claim against travel expenses on to temporary postings of under 24 months, even outside the UK, going back 4 tax years. Travel can be by either their own vehicle or public transport.
• Phase one training must be complete to claim a tax refund for travel to work expenses.
• Reservists and Territorial Army personnel tend to spend most of their service in one place so wouldn’t usually qualify under HMRC rules which say you need to be travelling to temporary workplaces to claim back the tax paid on your travel expenses.
• On the 8 May 2014, the Ministry of Defence confirmed in a letter to RIFT that service personnel can claim tax refunds. Full details can be read here.
• DIN ‘2015DIN01-005’ was issued to all service personnel to officially confirm that service personnel can claim tax refunds against travel expenses on temporary postings of under 24 months, even outside the UK. Read the rules around MOD tax refunds here.
• If the person receives Home to Duty (HDT) or Get You Home Travel (GYH) allowance they may still be able to claim a refund if there's a shortfall against the limits allowed. Find out more here.
• There are many different living arrangements for Armed Forces personnel (living on base, with partner/parents, in Married Quarters, overseas posting, etc). This is where the rules can get complex as any travel expenses are calculated on the cost of travelling between work and “main residence”. To learn more about common living arrangements for the Armed Forces and rules around this click here.

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Termination Payments and Benefits

There is no charge under Section 401 ITEPA 2003 for a payment or benefit provided: under a Royal Warrant, Queen’s Order or Order in Council to a member of HM Forces or by commutation of an annual or periodical payment under such a Warrant or Order to a lump sum.

Continuity of Education Allowance (CEA)

The CEA is paid to service personnel to provide a continuity of education for their children that would not otherwise be possible if they accompanied their parents on frequent assignments both at home and overseas. The CEA is currently liable to tax when paid to recipients based in the UK but the tax is paid by the MOD on behalf of CEA recipients. The financial impact of the measure will be neutral for service personnel and their families but the measure will simplify administration of the allowance.

Armed Forces Compensation Scheme

Payment made for wounds or disability under the Armed Forces Compensation Scheme or one of the schemes that it replaced – these are a type of pension (ITEPA 2003 s.638 – 641) (EIM 74301).

Pension for Bravery

Pensions paid if you are the holder of a reward for bravery eg. the Victoria Cross and the George Cross (ITEPA 2003 s.638 – 641) (EIM 74301).

Loans for Property

Interest free loans from the MOD are available for the purchase of a property. These loans are tax-free up to £10,000. Amounts above this amount are taxable in the usual way.