Employment expenses: travel

Introduction

It is crucial to understand that the rules on what travel expenses qualify for tax relief are quite strict. There is generally no tax relief available for the costs of 'ordinary commuting' – that is, travel between an employee’s home and a permanent workplace (more on this in ‘The basic rules’ below).

Below we consider the tax position for different types of travel expenses you might incur in relation to your job. For information on the specific rules around travel expenses incurred by agency workers and those employed by employment intermediaries such as ‘umbrella companies’, see our dedicated pages on agency workers and umbrella company workers.

There is no requirement in law for an employer to pay or reimburse an employee’s travel expenses, although many do, as a matter of good practice, particularly where the travel is ‘allowable’. Whether or not they do so, will depend on what has been agreed between you – for example as per the employment contract. If they do so, and it is for allowable travel expenses, tax and NIC relief should be given by them automatically – you do not need to claim it. If they pay or reimburse non-allowable travel expenses, then this is considered extra wages – and subject to tax and NIC.

The basic rules

Travel expenses are only allowable for tax purposes if:

• You have to make the journeys in the performance of the duties of your employment (this may apply where the duties themselves inherently involve travelling such as a delivery driver or meter reader), or
• They are journeys which you make to or from a place you have to attend in the performance of your duties, which can include trips from your office or other work location to visit a customer or other ‘temporary’ workplace. This rule can also include travel directly from your home to visit a customer or to another ‘temporary’ workplace. Note that the word ‘temporary’ has a specific meaning in tax law, which is not the same as the ordinary, natural meaning of the word – it typically applies when you are required to do any work in another location for a temporary purpose, as part of your ‘core’ employment.

Permanent and temporary workplaces

It is important to understand these two terms as travel expenses between an employee’s home and permanent workplace will not be allowable, while travel expenses between an employee’s home and temporary workplace may be (as per the second bullet point in the material directly above).

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 on an ongoing basis.

A temporary workplace is somewhere you would attend irregularly or for a limited period of time. 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.

However, a workplace will not be ‘temporary’ if you attend it for a period of continuous work lasting more than 24 months. A period of continuous work is a period over which the duties of the employment are performed to a significant extent at that workplace. HMRC consider the duties to be performed to a significant extent if the employee spends 40% or more of their time at that place.

So, where an employee spends less than 40% of their time at a temporary workplace, they do not need to consider the 24-month rule.

Ordinary commuting

Ordinary commuting is travel between your home and a permanent workplace. Costs of ordinary commuting are not allowable for tax purposes. Ordinary commuting also includes travelling to other places that are not significantly different to ordinary commuting. This means that if an employee, for instance, is required to attend a temporary workplace and the journey to the workplace is substantially the same as that to the usual place of work (and at a similar expense), no tax relief will be allowed.

If you were to travel from home to a temporary workplace that was very close to your permanent workplace, you should expect that the costs of doing so would be ordinary commuting costs and so no tax relief would be available.

The situation is less clear cut where you are travelling to a place that is not in the same vicinity as your usual office (even though it may be the same distance away) – this is because it is not ‘broadly the same journey as the employee’s ordinary commuting journey’.

Sometimes, employers may want to pay or reimburse your costs of ordinary commuting for a time – for example, where the employer has relocated and made the journey to work longer or more expensive.

As such journeys are not ‘allowable’ your employer cannot reimburse them on a tax and NIC free basis (or any associated accommodation or subsistence). They will be treated like ordinary employment income and there will be no tax relief. As such, some employers may protect their employees from the tax liability in these instances – for example, by covering the tax liability for them.

Working from home and travel expenses

The following considerations may apply if you are required to work from home, or work from home on a hybrid basis (so some time based at home and some time based at a workplace).

Your home may be your usual workplace. But you may nevertheless have to travel, for example, to visit a client, attend a meeting, or go into your employer’s office.

This travel can be seen as workplace-to-workplace travel, rather than home to workplace travel: this means it could count as an ‘allowable’ journey for the purposes of tax relief. Whether this is the case or not is likely to boil down to the specific facts and circumstances – for example, whether you are performing substantive tasks from home and whether you are required to work from home.

In reality, ‘workplace-to-workplace’ travel is quite a hard test to meet, as your home is your home as well as being your workplace.

However, it is also possible that you could be travelling from home to a ‘temporary workplace’ (and so qualify for tax relief that way). This could apply even if you go to your employer’s office provided each visit is limited in duration or self-contained - that is, arranged for a particular reason rather than as part of a series of visits to the same workplace for the continuation of a particular task. For more on this see HMRC’s guidance.

Hybrid working

You are likely to have two permanent workplaces – your home and the office.

On the days you are travelling into the office to work there, this travel is likely to be ordinary commuting.

Site-based workers

Site-based employees are employees without any fixed workplace whatsoever. For example, an IT service desk support, integrated for a time within a client’s office building and working at a succession of sites. They are allowed tax relief for the related travelling, accommodation and subsistence expenses provided work at that site doesn’t last longer than 24 months.

You may not be a site-based employee, if it is reasonable to assume that the period of work at the site will comprise 'all or almost all' of the period for which you work for that employer.

Construction industry employees

There may be different rules for you if you are site-based – for example, if you are employed in the 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, and your employment contract spans more than one such site-based contract, your travelling expenses to and from home may be eligible for tax relief.

Sometimes, you may be asked to work away from home on a long construction project (with subsistence and accommodation provided). If you are expected to spend more than 24 months there from the outset, then the workplace is considered your permanent workplace and any travel costs (including any associated subsistence or accommodation) to get there are considered ordinary commuting.

Note that where employees are working on several sites for an employer they may be regarded as working at one single site if they are near to each other. This may be important when considering the 24-month limit.

Also note that where employees are office-based and make visits to sites (rather than being based at the site), the office to site travel will qualify for tax relief but the home to office travel probably will not.

No usual workplace

If you are an ‘itinerant’ worker (that is one where travelling forms an inherent part of your duties, such as a delivery driver, meter reader or domiciliary care worker), normally you would be able to claim tax relief for all your costs of travelling – even those from home to work.

One exception to this would be if you were an area-based employee, in other words one whose employment duties are specifically defined by reference to an area. Even if you must attend different places in the area in the course of your job, the area could be regarded as a permanent workplace and travel costs to and from your home and inside the boundary of that area would not be allowable.

More than one job

The costs of travel between the two jobs or workplaces would be ordinary commuting, although see our guidance for some specifics around agency workers.

Other business travel expenses

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.

Provided these relate to allowable business journeys, if your employer pays for any of these directly, or you pay them and get reimbursed, since 6 April 2016, this will not be treated as a taxable benefit on you and so you need take no action.

If your employer does not repay you in full for such business travel expenses, you can deduct the difference from your earnings and claim tax relief.

If you get a round sum travel 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. There are some exceptions:

Personal incidental expenses

Employees who stay away overnight while travelling on business are entitled to tax and NIC-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. No receipts should be needed by your employer.

The rules do not permit a deduction for incidental expenses incurred by the employee that are not reimbursed by the employer.

Subsistence expenses

Provided certain conditions are met, subsistence can be reimbursed by employers by means of a tax and NIC-free scale rate payment rather than based on the actual expenditure incurred by employees in performing their duties.

For example, rather than reimbursing an employee £2.59 for a sandwich and £1.99 for a coffee, to keep things simple employers may just pay a round sum amount of £5. Employers are free to come to a specific agreement with HMRC as to the rates. Otherwise HMRC have benchmark scale rates which all employers can use.

You can find out more about these in HMRC’s Employment Income Manual on GOV.UK.

Employers can pay less than the published rates. If an employer pays less than the published rates, employees cannot claim tax relief on the difference between the HMRC published rate and the rate their employer pays, but if they spend more on subsistence expenses than the amount that is reimbursed they can still claim a deduction from HMRC for the difference between what they actually spent on the expense and the amount reimbursed by their employer in the normal manner, subject to their having retained appropriate evidence.

You should keep a note of dates and trip details, and keep all receipts, for example, receipts for taxi or train fares, as proof of payments you have made, including credit card statements.

If you do not get a receipt, make a note of who you paid, what you spent and the date.

Tax relief on travel

If your travel qualifies for tax relief, then assuming your employer does not pay or reimburse the expenses, you should be able to claim tax relief for your travel expenses (for example, train or bus fares).

If you use your own car or van for such journeys there is the statutory system of tax-free approved mileage allowances for business journeys. If an employer pays less than these amounts, you can claim tax relief for the unused balance of the approved amount (this is known as the mileage allowance relief (MAR) system). You can read more about using your own car for business journeys on our page on employment expenses using your own car.

You deduct the amount of the expense from your employment income, reducing the amount of income on which you pay tax. There is information on claiming tax relief on our page PAYE tax refunds.

More information

You can find out more about the travel rules and about how HMRC apply them to different scenarios in HMRC’s booklet 490. (Please note that even though this booklet is referred to as an employer booklet, it is useful for employees too.)

HMRC’s more detailed and technical information can be found in their EIM manual starting at page EIM31800.