Pilots Tax Refund Guide
As a pilot or co-pilot, you are entitled to tax relief on many of your work expenses.
This can be in the form of Flat Rate Expenses Allowance, or a tax rebate claim based on the actual amounts you have spent. The main difference between the two is that you need receipt evidence for a claim based on actual amounts spent, but not for an FRE allowance payment.
Our pilot’s tax refund guide fills in the details for both options and how to make the best decision for your financial position.
Flat Rate Expense Allowances (FREA)
FREAs are set amounts that have been agreed between HMRC and an appropriate industry body. In your case, BALPA negotiated the tax relief deals for pilots and co-pilots.
You can claim tax relief at the highest rate of tax you pay; that’s 40% for Higher rate taxpayers.
How much is it worth?
The biggest current Flat Rate Expenses Allowance rate is £1,022 per year for all uniformed co-pilots and pilots. That’s a tax saving of £408 for higher rate taxpayers.
Who is it for?
This FREA is for pilots and co-pilots of aeroplanes and helicopters that are employed under PAYE.
What is this FREA for?
One Flat Rate Expense Allowance gives pilots tax relief on uniform and other equipment that you buy yourself to use at work.
This includes:
- Cleaning your work uniform
- Navigation flight computer (CRP5)
- Sunglasses
- Atlas
- Calculator
- Protractors/dividers
- Pens and clipboard
- Chart plotters
- Duplicate passport
- Knee board
- Flight case
- Trifold
- Flight case
- Travel iron
- Mileage scale rule
- Currency commission
- Reference materials directly relating to carrying out duties
- Stopwatch
Are there other FREAs that apply to pilots?
Yes, you are entitled to £110 for travel to particular work related events, which include:
- Assorted training courses, such as CRM (Crew Resource Management), SEP (Emergency and Safety Equipment) and F&S (Fire and Smoke)
- Medical examinations
- Flight simulator time
- Technical Refresher courses
When do the FREAs not apply?
If your employer reimburses all of your costs, then the FREA does not apply. If they partially pay for any of this eligible expenditure, then the amount of FREA is decreased proportionately.
It is also important to note that the allowance does not apply to the initial purchase costs of your uniform, only subsequent replacement items.
Interestingly, luggage and computers are not included for pilots as they are not deemed essential in the actual flying of the aircraft.
How do I claim my pilots’ Flat Rate Expenses allowances?
If you are a first time claimant, you need send correspondence to HMRC or include the allowance on your tax return. This can be found online and you can either submit digitally or print and post. After you have claimed the first time, this flat rate allowance will be incorporated your tax code, so it is applied automatically and you don’t have any more paperwork.
If your employment situation changes, it is your responsibility to tell HMRC so they can amend your tax code accordingly.
For example, if you had previously been entitled to the full FREA amount, and get a new job with a company that reimburses most of your expenses, then your FREA amount should be decreased.
What else can a Pilot claim for?
As well as receiving your FREAs, pilots can also claim for:
- Noise cancelling headset. Although this is considered important safety equipment, not all companies provide their pilots with noise cancelling headsets. If you buy your own and are not reimbursed by your employer, you can claim tax relief for this cost.
- Personal electronic devices or computers that you use for work purposes. Warning: If you are issued a work device, but choose to buy your own because of personal preference, this is then not eligible.
- Replacement items of uniform. You cannot claim for initial purchase of uniform, but are entitled to tax relief on replacing worn out or lost items.
- Food and beverages before and during flights.
- Travel, subsistence and accommodation to a ‘temporary workplace’. This means a work location that you have been sent to at the behest of your employer and is not your usual airport. It gets a bit tricky to define here, but it’s still worth including in your tax relief claim.
BALPA subscription tax relief
HMRC will negotiate individual deals with Trade Unions and other professional bodies so that their members can receive tax relief on their subscription fees. This is not a done deal; each organisation must agree its own individual settlement.
BALPA members can reclaim tax on 67% of their membership fee which is a saving of £408 for higher rate taxpayers. Pilots belonging to the IPA are entitled to tax back on half of their subscription.
This tax relief no longer applies if you are reimbursed by your employer for this work expense.
Can I claim tax relief on the whole amount I spent, instead of taking the FREA?
Yes, if you are employed, HMRC give you the option of using the FREA or making a claim for the whole amount you actually spent on work expenses. Depending on the numbers involved, this may be the best option for you. It does require more time and effort to produce the necessary receipts and other documentation to support your claim. But if you have spent substantially more than the FREA, then it’s worth the time. If you are paid outside the PAYE system, submitting a tax rebate claim is the only way to access your tax relief.
Remember, you have basically overpaid tax and you should have it returned to you by HMRC. They do not have the facility to calculate how much and repay you automatically; they expect you to submit a claim.
Pilot self assessment tax returns
As a pilot you may have to complete a self assessment tax return each tax year. The usual reasons why a pilot would have to complete a tax return are:
- You earn £100,000 or more in any one tax year
- You are classed as a UK non resident for tax purposes
- You have job expenses worth over £2500 in any one tax year
- You have additional income (for example income from a rental property)
I live abroad but work out of the UK, how does that affect my tax rebate situation?
There are two answers to this question, depending on whether or not you are a UK national or a foreign national.
UK national
If you are a pilot, UK national and live abroad, you will need to be able to prove that your move is permanent in order to be considered UK non-resident.
The Statutory Residence Test came into play in April 2013 and it sets the parameters for those UK taxpayers working in the transportation industry. The third automatic overseas and third automatic UK tests do not apply if over 80% of your flights are cross-border and a minimum of six of these trips begin or end in the UK.
This means that you need to look at the first or second automatic overseas tests to determine your residency status. If they are non-applicable, then the sufficient ties test is brought into play. This means that the amount of midnights you are allowed to be in the UK and still be non-resident will be decided based on how many ties you have in the UK.
You also need to consider the taxation rules of the country you now live in and whether or not a Double Taxation Treaty exists with the UK government.
Foreign Nationals
If you are one of the many foreign national pilots that commute from your home country to the UK to fly, you are probably due a tax rebate from the UK government.
As an employed taxpayer, you will be paying the full amount of UK income tax within the PAYE system. Any income made during non-UK flying time should be subject to tax relief. So, you can claim a tax rebate for the proportion of your income that you make from working outside the UK.
It is very important that you can demonstrate you still live in your home country and have not moved yourself and/or your family to the UK. You must also consider your country’s Double Taxation Treaty arrangements with the UK and ensure you comply with your home’s income tax regulations.
How do I work out the details of my UK flying time?
To avoid a completely nightmarish calculation, HMRC have agreed some fixed times for pilots claiming proportionate UK tax rebates. These include debriefing time, layover time, report time, turnaround time and flying in UK airspace. Come the end of the tax year, pilots on PAYE can submit one claim for all UK tax relief based on cumulative records. You can include the flat rate expenses explained above and any other tax reliefs you are entitled to.
What is a section 690 claim?
A section 690 claim is a list of non-resident employees that your employer gives to HMRC, to ask for different income tax arrangements. If you are on this list, you only pay tax on 10% of your income during the tax year.
At the end of the tax year, you submit a self assessment tax return, which includes your actual duty flight figures, and pay any difference.
