How to Handle Travel Expenses UK the Right Way

What are travel expenses in the UK?

Travel expenses in the UK refer to costs that employees incur wholly, exclusively and necessarily for business purposes while performing their employment duties. HMRC sets out clear rules on what can and cannot be claimed, and understanding these rules helps ensure that businesses remain compliant and employees aren’t left out of pocket.

Common types of travel expenses

These are typical allowable business journeys and related expenses that can be claimed, provided they meet HMRC’s criteria:

To be tax free, the expense must be for a temporary workplace or a temporary purpose. Ordinary commuting (your regular commute from home to a permanent workplace) is not covered.

HMRC guidelines on allowable travel expenses

What counts as a claimable travel expense isn’t guesswork; HMRC has clear-cut rules. Understanding these helps ensure that employers and employees can confidently distinguish between what’s allowable and what’s not.

Business travel:

HMRC defines business travel as travel that is necessary for an employee to carry out their employment duties. This includes trips to a temporary workplace or between multiple job sites. The key point is that the journey must be for business purposes, not for personal convenience.

What qualifies as business travel:

• Travel to a temporary workplace: A location the employee attends only for a limited duration or for a temporary purpose, such as a project site or client office.

• Travel between workplaces: Moving between two or more workplaces for the same job (e.g. from Head Office to a regional branch).

• Site visits and meetings: Journeys made to attend off-site meetings, inspect locations, or carry out duties not performed at the normal work base.

• Business trips requiring an overnight stay: These may include hotel accommodation, meals, and incidental costs, provided they are directly related to the business activity.

Temporary vs. permanent workplace

A temporary workplace must meet both of the following:

• The employee attends for a temporary purpose

• The period of attendance is expected to last less than 24 months

If a workplace becomes the employee’s main base or is used over a limited duration that exceeds 24 months, it is considered a permanent workplace, and travel there becomes part of the normal commute, not eligible for tax relief.

Commuting vs. business travel

This distinction is a common stumbling block. For tax purposes, ordinary commuting (the journey between an employee’s home and their permanent place of work) is not considered business travel and therefore not eligible for relief.

By applying these distinctions properly, UK businesses can ensure they pay tax only where necessary and avoid issues around private travel or wrongly claimed travel costs.

Mileage and fuel allowances

Whether it’s a personal vehicle or a company car, understanding how to handle fuel and mileage is vital. HMRC has set fixed rates and rules that help employers reimburse staff fairly, and keep the taxman happy.

Approved mileage rates

Employees who use their own car, motorcycle, or bicycle for business travel expenses can be reimbursed using HMRC’s approved mileage rates. These rates are designed to cover actual costs such as fuel, wear and tear, and maintenance.

Current HMRC mileage rates :

Important points:

• These rates are tax free and don’t need to be reported to HMRC when used properly.

• They apply only to business journeys, not for ordinary commuting or personal travel.

• If the employer reimburses at a higher rate, the difference is subject to income tax and national insurance.

Passenger payments

When an employee carries fellow colleagues in their own vehicle during a business trip, they can receive additional payments known as passenger payments.

• Passenger rate: 5p per mile per passenger

• The passengers must be employees travelling on the same business journey.

This is particularly useful when pooling travel to a temporary workplace, reducing travel costs for the company while keeping reimbursements compliant.

Company cars

The rules are different when the employee uses a company car. Instead of mileage, advisory fuel rates (AFRs) are used to reimburse the cost of fuel only.

Key facts:

• AFRs are based on engine size and fuel type and are updated regularly by HMRC.

• They apply to fuel costs only; not to wear and tear or insurance, since those are covered by the company.

• If the employee uses a company car for private travel, including their regular commute, this triggers a benefit-in-kind charge and must be reported via a P11D form.

By applying the correct fuel rates, understanding what counts as a business journey, and differentiating between actual expenditure and HMRC-approved allowances, UK businesses can handle mileage claims without unexpected tax issues.

Subsistence and overnight expenses

When employees are staying overnight for work, there are rules around what subsistence can be claimed, from accommodation costs to a bite to eat and the private telephone call.

Accommodation

Employees can claim for overnight accommodation if they’re required to stay away from their permanent workplace for business purposes. The expense must be reasonable, necessary, and backed by receipts.

What counts as allowable:

• Hotel accommodation or B&Bs when no suitable alternative is available near the work location

• Short-term rentals or serviced apartments for extended stays

• Budget-friendly options where possible (luxury hotels may be challenged by HMRC unless justified)

Limitations:

• Only the actual costs of the stay can be reimbursed (no round-ups)

• The stay must be connected to a temporary workplace or limited duration assignment

• Expenses incurred must not include any personal travel or holiday elements

Meals and incidental expenses

When an employee is away on a business journey, they can claim food and drink costs, as well as certain extras. These must be modest, directly related to the trip, and not part of the usual regular commute.

Keep in mind:

• Set limits may be applied by employers through internal travel expense policies

• Reimbursing employees requires them to provide receipts or evidence of actual expenditure

• Fixed daily allowances (per diems) must still reflect real costs and may not be fully tax free

Clear documentation and consistent application of rules help businesses stay compliant and avoid disputes over what is or isn’t covered during an overnight stay.

Claiming tax relief on travel expenses

Not all expenses are automatically reimbursed by the employers but that doesn’t mean employees have to foot the bill. If the cost meets HMRC’s rules, they may be able to claim a tax break through tax relief.

Eligibility criteria

To claim tax relief, the expense must be:

• Wholly, exclusively and necessarily incurred for employment duties

• For a business journey, not for ordinary commuting or personal travel

• Not already reimbursed by the employer

Who can claim:

Travel to a permanent place of work or combining a business trip with a personal holiday disqualifies the expense for tax purposes.

Claim process

Employees can claim for business travel expenses not covered by their employer by submitting a claim directly to HMRC.

Step-by-step process:

• Check eligibility: Ensure the expense was necessary for business purposes and meets HMRC’s rules.

• Gather documentation
  Collect:

  • Receipts for travel costs, accommodation, food and drink

  • Details of business journeys (dates, locations, purposes)

  • Evidence that the employer reimburses partially or not at all

• Submit the claim

  • Use the P87 form (online or paper) for claims under £2,500

  • Use Self Assessment if claiming over £2,500 in total expenses for the tax year

• Track progress: HMRC usually processes P87 claims within 8–12 weeks. Keep records for at least 22 months after the end of the tax year.

Here is a quick reference to the tax relief claim options:

By following the right steps and keeping clear evidence of expenses incurred, employees can recover money they're entitled to, and businesses can avoid confusion about how and when staff can claim travel expenses.

Tools and resources for managing travel expenses

To manage travel expenses effectively and stay compliant, modern tools and reliable guidance are essential.

Using the right software streamlines the process of logging, tracking, and approving expenses, and reduces the risk of errors.

Popular tools for UK businesses:

These tools help enforce your travel expense policies, apply set limits, and keep your records audit-ready.

HMRC resources

For official guidance, rates, and forms, HMRC provides a range of online tools:

• HMRC: Claim tax relief on expenses

• HMRC: Advisory fuel rates

• HMRC: Expenses and benefits for employers

• P87 form submission

Bookmarking these links helps HR and finance teams stay informed and compliant with the latest travel expense rules.

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