Claiming travel and accommodation expenses
Are you self-employed and have to regularly travel for your business? And does this travelling ever involve an overnight stay away from your home?
If the answer is yes, then there's good news - you may be able to claim some of these costs back. Here's a few tips for working out which travel and accommodation costs you can include in your business’s accounts.
1. Reason for the journey
Before you can claim for travel or accommodation, you need to consider why you made the journey in the first place. Was it just for business, such as to visit a client or to pick up your new business cards?
And if it was for business, was it a one-off journey, or one that you undertake more frequently? A case in October 2015 saw HMRC veto tax relief on journeys from home to a place of work that was attended “regularly and predictably” by a sole trader.
Alternatively, was there a private element to your travel? For example, did you stop on your way home from a client meeting to do your weekly shop or another non-work-related chore?
Before you can work out if you can claim for your travel, you need to establish what the primary purpose of the journey was. If it was mixed (i.e. for both business and private), then you need to look at whether you can split the business element from the private part of the journey.
Let’s look at some examples.
Business journey: incidental private use
If your journey was primarily for business, and any private use of the journey was incidental, you can put the full cost of this travel into your business accounts.
Simon is a web designer. He travels by train from his home in Birmingham to visit a client in Brighton. While he is there, he has a walk by the sea.
The purpose of Simon’s journey to Brighton was for business. The private element, his walk by the sea, was purely incidental. Simon therefore claims the full cost of his train ticket in his accounts.
Mixed journey: different uses separable
If your journey included both business and private elements, but you can split out the private element, then you would include only the business cost in your accounts.
Jessica is a business consultant. She lives in Glasgow but has several clients who are based in Manchester. She travels to Manchester and stays there for two nights in order to attend meetings with her clients. She then decides to extend her stay to three nights so that she can attend a Premier League football match. Doing this costs her one night’s extra hotel bill and £50 in fees to change her train ticket.
The purpose of Jessica’s journey was to visit clients. She can claim the full cost of her train ticket but she cannot claim the £50 in fees to change the ticket, because she only had to do that in order to see the football match, which is not a business expense.
She can also only claim two nights’ worth of hotel accommodation, not three, because the third night’s stay was for a personal purpose.
Mixed journey: no separation possible
If your journey is for mixed purposes, and you can’t split out the business and personal elements, then you can’t claim any of the cost of that journey.
Tom runs a microbrewery. He travels to his local town to bank his business takings and to do the weekly supermarket shop for his family. Because that journey was for mixed purposes, and because he can’t split the cost into business and private, Tom must not include any costs for this journey in his business’s accounts.
2. Use of your own car
When you’re self-employed you will often travel in your own car on business.
The simpler way to do this is to include your business mileage in your accounts, at HMRC’s approved rates. If you’ve already been doing this for some years, you must continue to use this method until you change your car. If your business is new, then as from 6th April 2013 you can use this method if your annual sales are under the current VAT limit, which is £81,000 at the moment.
Otherwise you’ll need to work out your car running costs and claim a percentage of them in your accounts, based on how much you used your car for business and how much was private. This means you have to track the mileage you travelled for all your journeys, so that you can work out the business use percentage of your car.
This second method will take longer but may save you tax if you have a car that’s comparatively expensive to run.
3. Method of transport
HMRC don’t require you to use the cheapest available method of transport – or even to claim only the amount that the cheapest method would have cost you. You can claim the full amount you spent on the journey.
Let’s take an example.
Elizabeth is a self-employed PR consultant working in London. She travels to Edinburgh to visit a client.
To make this journey by overnight coach would cost her £35, to go by train would be £90 standard class or £160 first class, and to fly would cost her £80.
Elizabeth decides to save time and fly.
She can claim the full £80. She’s not restricted to claiming only £35 because there would have been a cheaper way she could have reached Edinburgh.
The main issue with travel and accommodation is to make sure you’re certain that the only costs you’re including in your accounts are for business travel. And remember - if you are in any doubt about what you can and can’t claim, you should seek professional advice from an accountant who will be able to advise you.
More expenses tips:
- How to manage your expenses day-to-day
- Working from home expenses
- Food and drink expenses
- Entertaining expenses
- Clothing expenses
- Scanned receipts and HMRC
This article was first published on 13 May 2013 and was last updated on 26 October 2015.
- Turning over a new leaf: tips for organising your bookkeeping in autumn
- MTD for Income Tax: next steps for sole traders
- Hack to the future: how hack days inspire creativity at FreeAgent
- Video: self-employed business expenses by HMRC
- Finance Bill 2017-19: Making Tax Digital back on the agenda