What travel expenses can I claim?
If you are an employee and you pay for travel expenses that are necessary to do your job, you might be able to get tax relief. This is a complex area but we cover the main points below.
It is crucial to understand that the expense you incur travelling from your home to your main place of employment is called the cost of ordinary commuting and you will not get tax relief on those expenses.
You can read how to claim other employment expenses on our page ‘What if I incur expenses in relation to my job’.
Below we consider different types of travel expenses you might incur in relation to your job and comment, in particular, on expenses incurred by agency workers and those employed by employment intermediaries or ‘umbrella companies’. In particular we cover:
It is important to understand these two terms. Most workers will have no difficulty in identifying their permanent workplace: it is the place where they regularly go to work. It may be a factory, office, shop or somewhere else – but it is the place where the employer expects the worker to be. You might have more than one permanent workplace if you have two jobs, for example, or if your employer requires you to work in one location for two days a week and in another location for three days a week.
A temporary workplace is somewhere you would attend irregularly or for a limited period of time, certainly for less than 24 months. For example, if you normally worked in Birmingham, but your employer required you to work from a store in Leicester for a year, then that store in Leicester would be a temporary workplace.
You can read more about permanent and temporary workplaces on the GOV.UK.
Ordinary commuting costs are the costs of travel between your home and a permanent workplace, or any other private travel. Ordinary commuting also includes the costs of commuting to other places that are not significantly different to the costs of commuting to a permanent workplace. For example, if you normally travelled 12 miles to work in a shop that is ordinary commuting. Similarly if you worked in another shop in a different location that was 10 miles from home, those costs would also be ordinary commuting costs.
You can read more about ordinary commuting costs on the GOV.UK.
There may be different rules for you if you are site-based – in other words you are employed in the building or construction industry and you are assigned to work at a particular site for a length of time governed by your employer’s contract there. Normally you would work at that site exclusively for that time and rarely visit the offices of your employer. Provided you are expected to work at that site for less than 24 months, your travelling expenses to and from home may be claimed as an expense for tax purposes.
You can read more about site based employees in the HMRC manuals.
Normally you would be able to claim the costs of travelling between the clients as a deduction for tax purposes. The exception would be if you had no regular workplace and your place of work was defined as a geographical area: in that case the whole area would be considered to be a permanent workplace.
Remember you may not be able to claim the costs of travelling between home and your first client nor between your last client and home as deductions for tax purposes if they would be considered to be ordinary commuting.
You may incur other business travel expenses, such as travel fares, meals or overnight accommodation (known as subsistence), parking charges, congestion charges and road tolls.
If your employer pays for any of these directly, or you pay them and get reimbursed, this will not be treated as a taxable benefit on you in the first instance since 6 April 2016. Before 6 April 2016 unless your employer had a special arrangement with HMRC, you would have received a form P11D at the end of the tax year, summarising the amount involved. You would then need to make a claim for tax relief to cancel out the tax liability that arose on the benefit.
If your employer does not repay you in full for your business travel you can deduct the difference from your earnings from the same employment to claim tax relief.
If you get a round sum travel allowance and the allowance exceeds your actual costs, you have to pay NIC on the difference between what you pay out yourself and the allowance. In the first instance, you are likely to pay tax and NIC on the allowance, but you can claim tax relief to the extent that you use the allowance for business travel expenses.
You normally get any relief in your PAYE code. You can also claim tax relief for your expenses on your tax return. If you do not need to fill in a return, you complete form P87 – Tax relief for expenses of employment.
Personal incidental expenses
Employees who stay away overnight while travelling on business are also entitled to tax-free reimbursement of up to £5 per night in recognition of their personal incidental expenses. This covers items like private telephone calls, laundry and newspapers. If your employer pays this tax relief happens automatically and you do not have to claim it.
An agency is an organisation that finds you work, but instead of you being employed by the businesses you ultimately work for, instead you are employed by the agency. The business for whom you carry out work pays the agency and they, in turn, pay you, after taking their fee.
When an agency finds you a job, that is treated as if it is an employment for you with a permanent workplace, thus meaning your travel to and from the job would be ordinary commuting.
Instead, if you are employed by the agency and move between different clients in a single day, for example, visiting them in their homes, then you would be able to claim tax relief on the costs of travelling between clients but not on travel to and from the first and last clients of the day.
An umbrella company is a company that employs you but relies on the agency to find work for you. As a result of you having a separate employment with the umbrella company, up to 5 April 2016 it was sometimes possible for all costs of travel, including home to work travel to be claimed as deductible from your taxable income. These types of arrangements are no longer effective for tax purposes.
An employment intermediary is a business that provides your personal services to another organisation, meaning that you would not be an employee of that other organisation, but instead be employed by the intermediary. An umbrella company is an example of an employment intermediary. Since 6 April 2016, any home to work expenses incurred by the employee of such an intermediary are not able to be claimed as expenses for tax purposes.
I am employed by an umbrella company or employment intermediary. How does that affect which expenses I can claim?
Up to 5 April 2016 it was sometimes possible to claim all travel expenses in relation to your job, including home to work, as a deduction for tax purposes. From 6 April 2016, that was stopped.
Before 6 April 2016 when the expenses that your employer paid you, or reimbursed, were fully covered by your tax relief, your employer could ask HMRC to issue a 'dispensation'.
If your employer had a dispensation, you would get tax relief automatically. Your tax code would not have shown the expense payments and you should not have included them on your tax return if you completed one.
Example from before 6 April 2016
Chris makes a business trip to Edinburgh. His employer pays directly for his train ticket and overnight hotel costs, which total £75. The £75 is classed as additional income for Chris, but as far as Chris is concerned, the £75 is a business travel expense.
The employer had to include the £75 on Chris’s form P11D. Chris could make a claim for tax relief from HMRC in respect of the £75. So the tax relief cancelled out the taxable benefit.
To save time and paperwork for Chris, his employer and HMRC, HMRC could issue a ‘dispensation’ to the employer in respect of business travel expenses. This meant Chris got tax relief automatically, and he could ignore his business travel expenses for tax purposes. They would not have shown on his form P11D.
You can read more about employment expenses generally on our page ‘What if I incur expenses in relation to my job?’
You can read more about tax relief you may be able to claim if you use your car on our page ‘What if I use my own car for business purposes?’
You can read more about agency workers in our ‘Agency workers’ section.