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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Accommodation: rent allowance or extra salary

Section 62 ITEPA 2003

It is common for an employee to:

  • own the property he lives in, or
  • rent the property from a third party, not his employer.

In both cases the employer may pay the employee extra salary or a rent allowance to help with the accommodation costs. This extra salary or rent allowance will count as earnings under Section 62 ITEPA 2003 (see EIM00511 onwards).

The payment may be exempted from the earnings charge if it was a qualifying removal expense (see EIM03103 onwards).

There may also be a Section 337 or 338 ITEPA 2003 deduction due where the accommodation qualifies for relief as part of allowable travelling expenses (see EIM31805).

There will be no further earnings charge under Part 3, Chapter 5 ITEPA 2003 (living accommodation benefit).