EIM65920 | Tax treatment of Local Government Councillors and civic dignitaries: allowances councillors may receive

From HM Revenue & Customs · Employment Income Manual

The following table summarises the types of payment being made to councillors and civic dignitaries, and their tax treatment. For authorities in England, you can find more guidance in the note that the Office of the Deputy Prime Minister issued to local authorities in July 2003 (see EIM65960 and EIM65970).

As regards expenses deductions that may be claimed by Councillors and civic dignitaries, see EIM65930 to EIM65950 and (in England only) EIM65970.

Type of payment	Tax treatment
Basic allowance	Taxable as earnings from the office held by the recipient (see generally EIM00510 onwards)
Attendance allowance	Taxable as earnings from the office held by the recipient (see generally EIM00510 onwards)
Special responsibility allowance	Taxable as earnings from the office held by the recipient (see generally EIM00510 onwards)
Conference attendance allowance	Taxable as earnings from the office held by the recipient (see generally EIM00510 onwards)
Financial loss allowance	Not taxable as employment income, but may in some cases be taxable as trading income (see BIM40475)
Travel and subsistence allowance plus Conference travel and subsistence allowance	These payments are not normally taxable because they are matched by an equivalent deduction for allowable expenditure (see EIM65930 to EIM65950). From 6 April 2016, they will normally qualify for an exemption (see EIM30200 onwards).
	However, if a day subsistence allowance is paid for a period of attendance at the place where the meetings of the authority or committee take place, this is taxable as employment income.
	Mileage allowances paid to Councillors and civic dignitaries for business mileage should be dealt with under the approved mileage allowance payments scheme (see EIM31200 onwards).
	From the tax year 2016 to 2017 onwards, mileage allowance payments to councillors for travel between home and a permanent workplace, where their home is within the authority area or no more than 20 miles from the area boundary, are exempt from tax and NICs up to the approved mileage allowance payment scheme maximum. Travel is treated as business travel for the purposes of any mileage allowance payments made, but no mileage allowance relief is available (see EIM65941).
	From the tax year 2016 to 2017 onwards, passenger payments made to councillors for travel between their home and a permanent workplace are exempt from tax and NICs up to the approved amount for passenger payments where:
	- the councillor’s home is within the authority area or no more than 20 miles from the area boundary; and
	- the passenger is also a councillor for whom the journey is treated as business travel (see EIM65942).
	From the tax year 2016 to 2017 onwards, payments of councillors’ travel expenses that do not relate to the use of their own vehicle (and which are not therefore covered by the exemptions for mileage allowance or passenger payments) are exempt from tax. This exemption does not apply for journeys between a councillor’s home and a permanent workplace, where their home is more than 20 miles from the boundary of the authority area (see EIM65943).
Allowance paid to civic dignitaries	This allowance is taxable if:
	- it relates to an office of profit (see EIM71100) and
	- it’s paid in respect of expenses that are not an allowable deduction for tax purposes.
	For authorities in England, see also EIM65970.
Incidental expenses	There is no tax liability where an authority reimburses the cost of incidental expenses such as postage or telephone calls (but not telephone rentals) and these are incurred wholly, exclusively and necessarily in the performance of the officer’s duties. Such payments will normally qualify for a dispensation.