Armed forces

Produced by Tolley

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

  • Armed forces
  • Zero-rate of secondary Class 1 contributions for armed forces veterans
  • 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
  • More...

Armed forces

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. For more, see Simon’s Taxes E4.746.

Zero-rate of secondary Class 1 contributions for armed forces veterans

Announced at Spring Budget 2020, with a TIIN following on 21 May 2021, to support the employment of veterans, the Government has introduced a zero-rate of NIC for employers of veterans in their first year of civilian employment from April 2021. This 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 legislation is expected to be put into place via the National Insurance Contributions Bill 2021. 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 takin

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