Director and Employee Travel Expenses: 2026/27 Guide (updated)

Director and employee Travel expenses are one of the areas that regularly cause confusion for limited company directors and employees. What can your company pay for? When is travel tax deductible? And when does HMRC regard a journey as ordinary commuting?

The overriding rule is that business travel expenses can generally be paid or reimbursed tax-free where the journey is necessary for the employee or director to perform their employment duties, provided the relevant conditions are met.

However, if your company pays for private travel or ordinary commuting, the payment will normally be taxable on you and may also result in a National Insurance liability.

Tip

You should keep detailed records of your business mileage and related expenses. That way you can support your claim if HMRC ever queries it.

What is business travel?

HMRC generally allows tax relief where director and employee expenses for travel are necessary in performing your employment duties or where you travel to a workplace you have to attend to perform those duties.

For example This commonly includes travel:

From one place of work to another

If you're like many company directors who run their own business, you may have an office or other premises which you attend regularly.

However, you might occasionally travel from your company's premises to another workplace. For example, you could travel directly from your office to visit a customer or supplier.

Provided the journey is genuinely for business purposes, the cost will normally qualify as business travel.

From home to a temporary workplace or vice versa

Travel between your home and your normal permanent workplace is not normally an allowable business journey. HMRC regards this as "ordinary commuting".

However, travel between your home and a temporary workplace can normally qualify as business travel. Therefore, this distinction is particularly important for directors who can work at different client sites.

Temporary workplace

A temporary workplace is broadly somewhere you attend to perform a task of limited duration or for another temporary purpose.

However, even travel to a temporary workplace can fail to qualify if the journey is substantially the same as your normal commute to a permanent workplace.

Therefore you cannot simply designate another location near your normal office as a temporary workplace and expect travel from home to qualify automatically.

Example 1

John is an IT manager and usually commutes by car between his home in Preston and his normal place of work in Blackburn.

On a particular day, he drives from home to his employer's other office in Newcastle to perform his duties there.

Assuming Newcastle qualifies as a temporary workplace, John can normally claim tax relief for the qualifying cost of the journey where his employer does not reimburse him.

Example 2

It is possible to have more than one permanent workplace.

For example, Alan lives in Taunton and is an area manager for a chain of electrical stores. He regularly spends two days a week at its Bristol store and three days a week at its head office in Bath.

Travel between Bristol and Bath for work can qualify as business travel.

However, if both locations are permanent workplaces, Alan's journeys between home and Bristol or Bath are ordinary commuting.  As a result, they do not qualify for tax relief.

Temporary workplace – the 24-month rule

This is one of the most important rules for contractors, consultants and directors working at client sites.

A workplace will generally stop being regarded as temporary where you spend, or expect to spend, 40% or more of your working time there over a period lasting more than 24 months.

In these circumstances, HMRC normally regards it as a permanent workplace.

Importantly, the test is based on what you reasonably expect to happen. For example, you may originally expect an assignment to last less than 24 months. However you may later learn that it will exceed 24 months. In that case, travel normally stops qualifying from the point your expectation changes.

Example 3

Susie normally works in Poole. Her employer sends her to Bristol for one day each week for 26 months.

Although the arrangement lasts longer than two years, she spends less than 40% of her working time at the Bristol workplace. Therefore, the 24-month rule would not normally make Bristol a permanent workplace solely because the arrangement lasts longer than two years.

In addition, there are extra rules for fixed-term appointments. For example, a workplace may be treated as permanent where an employee expects to spend all or almost all of a short employment working there.

What happens if there is no permanent workplace?

You may not have one normal place of work and instead work at a number of different locations.

For example, this is common for consultants, engineers and other employees whose duties require them to work at different sites.

Travel to genuinely temporary workplaces can normally qualify for tax relief. However, the rules are more complicated than simply saying that every site attended for less than two years qualifies.

Therefore the 24-month rule, the nature of the assignment and whether there is effectively a continuing workplace or geographical area all need to be considered.

Travelling appointments

For some jobs, travelling itself is an integral part of the employment.

For example, a travelling salesperson may spend much of their working day moving between different customers.

Where an employee has a genuine travelling appointment and does not have a permanent workplace to which they ordinarily commute, qualifying journeys starting and ending at home may be business travel.

In other words, the employee is travelling in the performance of their duties, rather than simply travelling to work.

Home-based employees and directors

Working from home does not automatically make your home a permanent workplace for tax purposes.

Instead, there needs to be an objective requirement for the employment duties to be performed at home. Simply choosing to work from home because it is convenient will not necessarily be enough.

However, if there is a genuine requirement to work from home, travel from home to another workplace may qualify depending on the circumstances.

On the other hand, if you have a separate permanent office which you regularly attend, travel between your home and that office will normally remain ordinary commuting.

Therefore this is particularly relevant for owner-managed limited companies. Simply registering your company at your home address or carrying out occasional administration there does not automatically turn every journey from home into business travel.

Business mileage

If you're an employee or director and use your own car or van for qualifying business journeys, your company can reimburse you using HMRC's Approved Mileage Allowance Payments (AMAP) rates.

For the 2026/27 tax year, the approved mileage rates are:

Importantly, the increase to 55p for cars and vans took effect from 6 April 2026. In comparison, for 2025/26 and earlier years back to 2011/12, the rate for the first 10,000 miles was 45p per mile.

For example, if a director drives 8,000 qualifying business miles in their own car during 2026/27, the company can reimburse:

8,000 × 55p = £4,400

This can normally be paid without income tax or National Insurance, provided the mileage represents genuine qualifying business journeys.

In addition, the company can normally claim a corporation tax deduction for the reimbursement.

Furthermore where a director carries another employee as a passenger on the same qualifying business journey, an additional passenger payment of 5p per mile may also be available.

VAT on business mileage

f your company is VAT registered, it may also be possible to reclaim VAT on the fuel element of mileage payments.

However, you cannot simply reclaim VAT on the full mileage allowance.

Instead the fuel element is calculated using HMRC's current Advisory Fuel Rates. These rates change periodically. Therefore, you should always use the rate applying at the date of the journey.

The VAT element can then be calculated from the fuel portion of the mileage payment.

For example, where the relevant advisory fuel rate is 15p per mile, the VAT element would be:

15p × 1/6 = 2.5p per mile

Finally, remember that the business must hold sufficient VAT invoices or receipts for fuel to support the VAT being reclaimed

Other Director and employee travel expenses allowable

Your limited company can also normally pay or reimburse other costs relating to qualifying business journeys.

For example, these can include:

However, parking fines and other penalties are different. Therefore they should not be treated in the same way as ordinary business parking charges.

Hotels and subsistence

Where you make a qualifying business journey, reasonable accommodation and subsistence costs associated with that journey can normally be paid or reimbursed by your company without creating a tax charge.

For example, if you have to stay overnight near a client because of a business meeting, the reasonable cost of your hotel and meals can normally qualify.

However, buying lunch close to your normal permanent workplace simply because you are working that day does not turn your lunch into an allowable business expense.

Alternatively, HMRC also provides benchmark scale rates which employers can use instead of reimbursing the exact cost of qualifying meals.

The current UK benchmark meal rates are:

In addition, where the £5 or £10 rate applies and the qualifying journey continues beyond 8pm, an additional £10 may be paid.

However, the employee must be undertaking qualifying business travel and the employer must operate an appropriate checking system.

Importantly, employers no longer need an HMRC dispensation to use the statutory exemption for qualifying expenses.

Alternatively, employers can also reimburse actual qualifying subsistence costs instead of using the benchmark rates. If a business wants to pay its own bespoke scale rates, these may need to be agreed with HMRC.

Incidental overnight expenses

There is also a separate exemption for small personal expenses incurred while an employee is staying away from home overnight for business.

Your company can pay up to:

However, be careful with these limits. If the payment exceeds the permitted amount, the whole payment can become taxable rather than simply the excess.

In addition, the limit is considered over the whole period spent away, rather than treating each individual night entirely separately.

Maintain good records

Whatever method you use, good record keeping is essential.

For mileage claims, keep details including:

In addition, for other travel and subsistence costs, keep receipts and evidence showing why the expenditure related to a qualifying business journey.

Finally, for scale-rate subsistence payments, your company should also operate an appropriate checking system to make sure the conditions for tax-free reimbursement have been met.

Director and Employee Travel Expenses: the Key Points

In summary, the key rules to remember are:

Ultimately, the rules can become complicated for director and employee travel expenses claims where you work from home, regularly attend client sites or expect to work at one location for a long period. If you're unsure whether a journey qualifies, it is worth checking before putting the expense through your limited company.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

Alternatively, please feel free to complete our Business Questionnaire here.

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