Accommodation Allowance Exemption

Accommodation Allowance Exemption

Policy Announcement

Under existing rules, living accommodation provided to members of the Armed Forces is free from a benefit-in-kind tax charge. The Future Accommodation Model (FAM) is still under development, however it plans to provide Service personnel with an accommodation allowance to help them rent or maintain accommodation in the private housing market in the United Kingdom. This does not affect members of the Armed Forces serving overseas.

The accommodation allowance will not be subjected to National Insurance contributions (NICs). A Class 1 NICs disregard will be introduced through regulations after Royal Assent to Finance Bill 2017-18.

This measure was announced at the Autumn Budget 2017.


Operative date

The measure will have effect after the date of Royal Assent to Finance Bill 2017-18, once regulations have been laid to impose conditions on the types of allowance that qualify for the exemption.


Current law

Service personnel are subject to income tax on the full amount of cash received as earnings from an employment under Part 2 of ITEPA 2003.


Proposed revisions

Legislation in the Finance Bill 2017-18 will introduce a new section in Chapter 8 of Part 4 of ITEPA 2003 which will provide that accommodation allowance payments to members of the Armed Forces are not liable to Income Tax.

The new legislation defines the accommodation allowance as an allowance paid for or towards the cost of accommodation for a member of the Armed Forces.

Regulations will be laid at a further date after Royal Assent to Finance Bill 2017-18 that will set out the conditions on the types of allowances that will qualify for the exemption. These conditions will be confirmed once the Ministry of Defence has taken its final decision on the types of accommodation allowance it will provide.



We welcome your comments and feedback on The Future of Accommodation Model and we will continue to take your views forward. You can email us at


Posted on: 23rd November, 2017