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Travel Allowance and Subsistence Rates in the UK: A Guide for Overseas Employers

Your employees in the UK will surely have some travel expenses, and you will want to know the exact travel allowances and subsistence rates that are permitted.  How will you find out and apply the correct rates if you are new to employing in the UK?

We can get you started with this guide for overseas employers, but at some point, you may need in-country resources to assist you.

HM Revenue and Customs in the UK

HMRC is the UK government agency that regulates the payroll system and sets the rules and travel allowance amounts for your employees.  Any expenses over the HMRC limits will be a taxable benefit to the employee.

How to Report and Pay in the UK

If travel and subsistence expenses exceed any of the maximum amounts allowed by HMRC, then they must be included in the payroll for the employee with both taxes and insurance withheld.  For this reason, it is extremely important to have the correct amounts allowed to avoid non-compliance with UK tax and payroll laws.

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Case Example: UK Travel and Subsistence Rates

One of our clients with employees in the UK recently reached out for a complete listing of the UK travel allowances and subsistence rates.  The first thing we told them is that there are different rates applied for both day travel and overnight stays.  The amounts listed can be reimbursed to the employee tax-free.

Day Travel Allowance in the UK (no overnight stay)

Employees can claim up to £4.50 for the cost of breakfast if:

  • They leave home at least 90 minutes earlier than normal on company business and,
  • will be away from home for more than 12 hours and,
  • did not have breakfast at home

Employees can claim up to £4.50 for the cost of lunch or an additional meal if:

  • They will be away from the office for 5 hours or more and,
  • They were not provided with a lunch or meal

Or employees can claim up to £9.30 for the cost of two meals if:

  • They will be away for the office for 10 hours or more and,
  • They were not provided with meals (if they were provided with lunch then they can claim up to £4.80 for their second meal).

Overnight Stay Allowance in the UK

Hotels

The maximum allowable costs for hotel and bed and breakfast stays are £125 per night for London based establishments and £85 per night for those based outside of London.

Meals/Expenses

For each 24 period away from the office, the employee can claim up to:

  • £4.50 for the cost of lunch if this is not provided
  • £14.50 for the cost of dinner if this is not provided
  • £5 for incidentals such as newspapers and laundry

Staying with friends and relatives

If your employees make their own accommodation arrangements, for each 24 hour period they can claim £25.  However, this amount is taxable and claims should be made on the taxable expenses claim form and will be paid (less Tax and NI) through salary.

Vehicle Mileage Rates in the UK

If your employee uses their own vehicle for business travel, these are the maximum rates under the HMRC Approved Mileage Allowance Payment (AMAP) scheme. The current rates are shown in the following table.

Cars and vans

Rate

Standard rate for the first 10,000 miles in the tax year

40p per mile

Lower standard rate for each additional mile over 10,000 miles

25p per mile

Motorbikes

24p per mile

Bicycles

20p per mile

 

Passenger supplement

If an employee uses their own car for business travel and provides a lift for other company staff who are also on official business, they can claim a 5p per mile supplement for each passenger.

Equipment supplement

If your employee carries business related equipment in your own car, they can claim 2p per mile.

Lease car mileage rates

If your employee is driving a lease car provided by the company, they can claim the following rates per mile for business use:

Engine size

Petrol

Diesel

LPG

1400cc or less

11p

11p

7p

1401cc or more

14p

11p

8p

 

Rail and Air Travel Allowance in the UK

Class of Travel

For rail travel all staff should travel using the standard class unless there is a clear business need for travelling by first class for example:

  • Where first class is cheaper than standard class
  • Where there are no standard class seats left on the train in which you need to travel
  • Where there are no standard class facilities to accommodate disabled or other specials needs requirements

For air travel, all staff should travel using the economy class unless there is a clear business or practical case for premium economy or business class.

The reason for these class of service rules is that premium class travel is assumed to be a personal benefit, and typically is not required for business purposes.

The Shield GEO Solution

The sheer number of travel expense rules may make you wonder where to begin when making the right calculations and inclusions in payroll.  This daunting task is why the solutions we offer can streamline your UK payroll process, and ensure that you remain in full compliance with the travel expense limits.

Shield GEO provides an end to end international employment service, and handles every part of immigration, payroll and employment for your staff in the UK.

 Need more information about employing in a new country? Learn more about:

Looking to Hire an Employee in the UK? Get in touch.

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