Tax exemptions for MOD employees

Everything you need to know about tax exemptions for MOD personnel

As an employee of the MOD, you might be eligible for certain tax exemptions. Now you may already be aware of these but if you’re not, let the experts at DSR Tax Claims enlighten you. After all, we know all there is to know about taxation matters. If you get to the end of our handy guide and you’re still not sure whether these apply to you, give our friendly team a call on 0330 122 9972 and we will sort you out.

So, what kind of tax exemptions might you be entitled to?

We have listed below all of the tax exemptions which might apply to you as a MOD employee.

Continuity of Education Allowance (CEA)

This allowance is paid to members of the armed forces to ensure that their children get a continuity of education, which obviously wouldn’t be possible of those children accompanied the parent in the armed forces on their different postings – whether in the UK or overseas. When paid to recipients who are based in the UK, it is liable for tax but the MOD covers this tax liability on behalf of the employee. This means that there is no financial impact on the MOD employee but this allowance allows it to be administered in a straightforward way.

Armed Forces Compensation Scheme (AFCS)

If you received an injury or illness caused by being in service on or after 6th April 2005, you may be entitled to compensation under the AFCS. You would do not need to have left the armed forces before claiming. This scheme replaced previous schemes which applied to injuries or illness caused prior to 6th April 2005 and these schemes offer either a lump sum or a continued payment, as a kind of pension.

Interest-free loans for property

The MOD offers interest-free loans to employees to aid in the purchase of property. These loans are tax-free up to £10,000 although loan amounts above this threshold would be subject to tax.

Mess Expenses

Any contribution to mess expenses is exempt from tax.

Payments for Food and Drink

Payments made in lieu of food and drink that would normally have been supplied to armed forces members are exempt from tax.


As a member of the armed forces, you should receive a Flat Rate Expense (FRE) in the form of a payroll adjustment to cover the laundry costs for your uniform. These FREs are currently set at £80 for members of the Navy and £100 for Army, RAF and Marines members.

Termination payments and benefits

If you receive a lump sum as a result of being made redundant, that lump sum is tax free. If you receive your termination benefits as a regular income then that would be subject to PAYE taxation.

On top of these tax exemptions, MOD employees are also entitled to claim back travel expenses to temporary workplaces (that is, any assignment that is less than 24 months), or where the employee receives the Home to Duty (HTD) allowance or the Get You Home (GYH) allowance, then you would be entitled to claim the shortfall between that and HMRC mileage allowances.

We at DSR Tax Claims are tax preparation specialists and are experts at getting you your maximum rebate fast – give our friendly team a call on 0330 122 9972 and let us get your hard-earned money back where it belongs in your bank account.

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