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Tax on reimbursements do I need to pay it?

Tax on reimbursements is question we get often. In short, the answer is no. *see below for exceptions.

Employee/Freelancer tax on reimbursements

If you are an employee or freelancer, you may have to pay for certain items out of pocket which will then be reimbursed by your employer. This may look like:

  • Tickets to a conference
  • Petrol to drive to a client meeting
  • A computer/mouse/keyboard

How you expense these depends, if you are an employee this is usually done through a software, if you are a freelancer this is generally added to your next invoice.

In either case, you do not have to pay tax on the money you receive.

pay you tax now here!

Employer tax on reimbursements

If you are the one reimbursing the expense, you also will not need to pay tax on this. This expense will be treated as though it came directly out of your business bank account, and will be reconciled accordingly by your bookkeeper.

Tax On Reimbursement Exceptions

Of course, there are exceptions when it comes to tax on reimbursements.

  • Medical/dental insurance
  • Loans
  • Living accommodation

The above count as a “benefit in kind” and generally means you’ll pay tax on this amount. In some situations, like medical insurance when you are working abroad, it is tax free.

There are a couple of different ways this is declared:

If the employer pays directly – the employer must report it through the P11D form at year end.

If the employee pays directly & gets reimbursed – this is added to the payslip and taxed accordingly monthly.

Need help? We offer payroll services as well as free consultations to answer all of your questions.

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All of our data comes directly from HMRC’s government website. This article was created using this resource.