Tax exemption for travel expenses of members of local authorities

10 July 2015

From April 2016 there will be a new exemption from Income Tax and a disregard for National Insurance contributions for travel expenses paid to councillors by their local authority.

This measure will have effect on payments made on and after 6 April 2016.

Legislation will be introduced in Summer Finance Bill 2015 to amend Part 4 of ITEPA to exempt payment of councillors’ travel expenses from a charge to income tax. This will include expenses paid for journeys between the councillor’s home and permanent workplace, except where the councillor’s home is more than 20 miles from the boundary of the local authority area.

The current rules for MAPs, AMAPs and MAR will continue to apply to business travel undertaken by a councillor in their own vehicle. Journeys between a councillor’s home and permanent workplace, where their home is either in the local authority area or within 20 miles of the boundary of the area, will be treated as business travel when calculating MAPs and applying the AMAPs limits, but will not be treated as business travel for calculating MAR.

The tax exemption will also apply to qualifying passenger payments up to the approved amount, but only where the passenger is also a member of the local authority. The exemption will only apply where payments are made by a local authority under certain provisions. Treasury Regulations will set out relevant definitions and the provisions that payments must be made under.

Amendment will also be made to the Social Security (Contributions) Regulations 2001 (SI2001/1004) to give effect to these provisions for Class 1 NICs purposes.

For further details see Tax exemption for travel expenses of members of local authorities.