For employees this is pretty straightforward – just hand the receipts over to your employer and let them sort it out. For self-employed people it can be a bit more confusing, so we explain what travel expenses you can claim for, and how to claim.
Yes! As a business owner you can, and should, claim for business expenses. HMRC tax businesses on their profits, not their income, so deducting your allowable expenses from the income you earn helps reduce your tax bill.
The key word here is ‘allowable’ expenses. Travel costs can count as a business expense, but there are limitations as to what types of travel you can include.
What travel expenses can I claim?
The golden rule with any type of expense is that it’s “wholly, exclusively and necessary” for the business. You can claim for travel costs, but only if they’re business related. No school runs and shopping trips on HMRC, we’re afraid!
Commuting costs versus business travel expenses
It’s absolutely crucial that you make sure you can distinguish between a commute, and a travel expense, because commuting costs are not an allowable expense.
The journey you make from home to the business premises, workshop, or job site you normally operate from is a commute, and you can’t claim for it
A journey you make in the course of running your business, such as to attend a meeting or a training course is an allowable expense that you can claim tax relief on
The 24-month rule for contractors
The whole ‘no claiming for commuting costs’ is a bit more complicated if you’re a contractor who needs to travel to the client’s workplace every day.
To try and keep things fair, HMRC allow contractors to claim travel expenses for the journey from their home to the client’s premises, but only if it’s a ‘temporary workplace’, which is where the 24-month rule comes in.
The location is only classed as a temporary workplace if the contractor will be there for 24 months or less. For example, if you sign up for an 18-month contract to work out of your client’s offices then you can claim the travel costs as an expense. But, sign on for a 30 month contract, and you can’t.
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What counts as a travel expense?
If you can only claim for business-related travel expenses, what does this actually apply to? Some examples of what you can claim for include the following:
Mileage, normally worked out using either a fixed rate per mile, or you can work out the actual cost
Repairs and servicing for a vehicle, though this may not be the case if you also use the vehicle for personal travel as well
Vehicle hire or leasing charges, though you may only be able to claim for a portion of this if it’s a long-term hire
Car parking charges, but you will need to keep receipts
Public transport such as travel by bus, train, air or taxi, as long as you have receipts or invoices
Tolls and congestion charges
How do I claim my travel expenses?
You’ll need to include the total amount of expenses you’re claiming on your tax return – the type of tax return you fill in depends on the structure of your business. For example, a sole trader will include their expenses on their Self Assessment tax return.
You won’t need to hand over the proof of your expenses with your tax return, but it’s important to keep hold of any supporting evidence anyway. There’s always a chance that HMRC will decide to carry out a compliance check!