The tax man cometh..

Discussion in 'Finance, Property, Law' started by Forces_Sweetheart, May 16, 2002.

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  1. This article, by my tax expert contact, summarises some of the special tax rules that might apply to members of the armed services...

    Income tax on salary or wages

    Your salary and wages should be subject to tax in the same way as civilians.  However, if you are currently serving overseas, the extra overseas allowance you receive will be exempt from tax.  This should be automatically taken into account when your salary is paid to you.  The quid pro quo is that your basic pay will be taxable in the UK - even if you are abroad for so long that you would otherwise be treated as non-resident for tax purposes.  

    However, under an agreement made by the Government, you should not have to pay tax in the country to which you are posted.

    Normally, if your employer were to pay for travel from your place of work to home (or vice versa) tax would be payable in respect of the amount paid.  

    However, a concession exists in respect of any travel facilities, travel vouchers or travel warrants provided for members of the naval, military or air forces of the Crown going on, or returning from, leave.

    The exemption applies whether or not the payment relates to a particular journey.  So this would mean that you could use the payment to fund a week's touring rather than return home to see your family.
    Under the strict letter of the law, employees are normally liable to pay tax on any meals provided to them by their employers.  

    Whilst a concession exists for most work-place canteens, there is a formal exemption for members of the armed services.  This exemption extends to cover meal allowances that may be paid in lieu of meals in a mess.

    Tax relief for members of overseas forces

    If you are stationed in Britain as a member of another country's forces, you will not be liable to UK tax on your salary or wages.  Similarly, any time spent in the UK as a result of your official duties will be ignored when determining whether or not you are UK resident for tax purposes.


    If you are a reservist, you are not liable for either income tax nor National Insurance contributions in respect of any "training expenses allowances" you may receive.

    As far as reserve pay is concerned, a simplified version of PAYE should operate allowing tax to be deducted at the basic rate (currently 22%) or you might have no tax deducted.  If you have no other taxable income, you can ask for no tax to be deducted from your reserve pay.  If you do have other taxable income, you might prefer to have tax deducted from your reserve pay.  However, you should note that under the strict law, you cannot require this.
  2. Personal allowances

    Most readers of this article will be entitled to a personal allowance - allowing you an income of £4,615 each year before you have to pay tax.  This amount may rise if you are older than 65.  This is available to all UK residents and residents of the Channel Islands and the Isle of Man and citizens of countries within the European Economic Area or the Commonwealth.

    However if you have served in the British armed forces, you will always be entitled to a personal allowance - even you fall outside the above criteria.  And if you are the widow or widower of such a person, then you will also be entitled to a personal allowance.


    Pensions are not usually tax-free.  However, the following annuities and pensions (or additional pensions) may be received free of tax if paid to holders of:
    • the Victoria Cross
    • the George Cross
    • the Albert Medal
    • the Edward Medal
    • the Military Cross
    • the Distinguished Flying Cross
    • the Distinguished Conduct Medal
    • the Conspicuous Gallantry Medal
    • the Distinguished Service Medal
    • the Military Medal
    • the Distinguished Flying Medal.

    You are also exempt from tax in respect of any pension you receive in recognition of a death due to:
    • service in the armed forces or
    • wartime service in the merchant navy or
    • war injuries or
    • peacetime service in the armed services before 3 September 1939 (if paid by the MOD) or
    • the equivalent to any of the above if paid by another country.

    You are also exempt from tax in respect of the following disability pensions:

    • wounds pensions granted to members of the armed forces
    • retired pay of disabled officers granted on account of medical unfitness attributable to or aggravated by military service
    • disablement or disability pensions granted to members, other than commissioned officers, of the armed forces on account of medical unfitness attributable to or aggravated by military service
    • disablement pensions granted to persons who have been employed in the nursing services of any of the armed forces on account of medical unfitness attributable to or aggravated by military service; and
    • injury and disablement pensions payable under any scheme made under the Injuries in War (Compensation) Act 1914, the Injuries in War Compensation Act 1914 (Session 2) and the Injuries in War (Compensation) Act 1915 or under any War Risks Compensation Scheme for the Mercantile Marine.

    If you are in receipt of a normal military pension as well, the tax exemption will only apply to the part that relates to your disability.  As was recently announced on the news, the Army and the Navy (unlike the Air Force) had been wrongly deducting tax on these invalading pensions.  It is thought that all the necessary corrections have now been made.  However, if you are unsure about your position, more information is available from the Veterans Agency (via the MOD website:

    Under a concession granted by the Inland Revenue, if you have an employer who pays you an additional pension in respect of war wounds, you will not have to pay tax on this additional amount.

    Inheritance tax

    Should you die on active service, no inheritance will be payable on your estate - even if it exceeds the current threshold of £250,000.

    By concession, this was extended to members of the Royal Ulster Constabulary who died as a result of terrorist activities.  

    The exemption will apply even if you die many years after active service, provided that the cause of your death was a direct consequence of an injury sustained.
    If you or your husband were a Japanese prisoner of war, you or he may have received compensation in the order of £10,000.  If so, this amount may be deducted from your estate for inheritance tax purposes.
  3. Dear F_S,

    Your shine light where there is darkness....!

  4. Did you know you can claim £60 per year from the Tax man for cleaning of your uniform. This can also be back dated for 6 years. If you were a train driver you can claim £75 per year for cleaning your one and only uniform. Simply phone your tax office and ask them to send you a self certified tax return form and fill in box 1.35 on page E1 (pink pages)
  5. Tried & rejected by the tax man, on the grounds the unit clothing stores offer a free dry cleaning service. However, if your QM has with drawn the service you need something in writing to confirm this.
  6. By the way, if any of you soldiers are required to fill in a tax return (for instance if you have an additional income from rented property etc) then make sure you send it off by the end of September if you want the Revenue to calculate it all for you. They love to fine people who are late. If you have never had to complete self-assessment before and have had additional income this last tax year (6 April 2002 to 5 April 2003) then you must ask for the forms to complete. The responsibility rests with you to come forward and the Revenue will not accept 'I was not sent any forms so didn't know' as a response. Horrors.
  7. I know we generally frown on opening up long dead threads, but having just benefited from having this info thrust into my view and spending 10mins on the phone to get all my tax rebated on my pension I thought I should share. I'm still waiting to actually see the cheque, but it appears kosher. Why no one told me about this at he time of the award escapes me, but at least I know now! If you fit this category ring HMRC and get it sorted.
  8. Its not very well known at the tax office I know I work there). But quote either
    Section 638 Income Tax Act 2003 or EIM74307

    Its thoroughly well deserved as well.
    • Like Like x 1
  9. Thanks - all sorted got my NT coding through today. Quite why the Army couldn't let us know at the time escapes me....