Armed forces

Produced by Tolley
Armed forces

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Armed forces
  • Regular UK armed forces
  • Food and drink
  • Operational allowance
  • Travel to and from leave
  • Payments of council tax relief
  • Continuing education allowance
  • Laundry allowance
  • Reserve and auxiliary forces
  • Bounties
  • More...

There are special tax rules that apply to members of the regular UK armed forces, reserve and auxiliary forces, and members of visiting forces.

For all categories of UK service personnel, the basic rule is that all pay, pensions and other income is taxable as employment income, liable to National Insurance contributions (NIC) and subject to PAYE. However, there are some particular exemptions for payments and benefits that would normally appear to be taxable. These are described below. Unless otherwise stated, exemptions for NIC also apply where there is an exemption from tax.

As announced at Spring Budget 2020, to support the employment of veterans, the Government will introduce a NIC holiday for employers of veterans in their first year of civilian employment from April 2021. The holiday will remove any employer’s NIC liability on the veteran’s salary up to the upper secondary threshold (£967 a week for 2021/22). The following points apply:

  1. this will be a zero secondary NIC rate rather than an exemption, so will not for instance affect apprenticeship levy contributions

  2. the zero rate will apply for 12 months following taking the first civilian job when leaving the regular armed forces. There is no maximum time limit after leaving the forces, and only one day’s previous forces service is needed. Furthermore, if the individual changes jobs (or takes more than one job) in the 12-month

Popular documents