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Revenue is putting more and more effort into helping businesses of all sizes follow their rules and establish good financial practices. However, understanding expense compliance can still be tricky, and the penalties for mistakes can be serious. 

To help you better understand and comply with Revenue’s guidelines, we’ve created this comprehensive guide. Here, you’ll find clear and practical advice on claiming and processing expenses in Ireland, ensuring you stay on the right side of the regulations while maximising your financial efficiency.

Whether you’re a small startup or a large corporation, this guide aims to illuminate the path to seamless expense compliance in Ireland. 

How to make sure your business complies with Revenue 

Many people think Revenue inspectors only care about completed expense claims and receipts, but they actually review your entire travel and expense process.

The 6 key areas Revenue inspectors focus on

1. A clear and enforced policy

Make sure your business has a clear expense policy that all employees understand and follow.

2. Appropriate approval processes

Ensure that the right people are approving expenses at the right levels.

3. Appropriate documentation

Keep detailed records of all receipts and expense forms.

4. Appropriate checks and controls

Implement checks and controls to prevent errors and fraud. Regularly review these controls to ensure they are effective.

5. Tax and VAT compliance

Ensure that all expenses comply with tax and VAT regulations. You need to keep up to date with any changes in these regulations.

6. A robust and secure payment process

Use secure methods for reimbursing employees. Ensure payments are processed accurately and on time.

The VAT rates in Ireland

VAT is a general consumption tax that is charged directly on the sale of goods and services in Ireland.

Here are the rates for 2025:

Rate	Type	Goods and services
23%	Standard	All other taxable goods and services
13.5%	Reduced	Some foods, pharmaceutical products, children’s car seats, energy products and supplies, supply and development of immovable goods.
9%	Reduced	Some foods, newspapers, admission to cultural events, admission to sports facilities, hairdressing.
4.8%	Reduced	Livestock and agricultural supplies.
0%	Zero	Some foods, animal feed, medical equipment, children’s products.

It’s also worth noting that the supply of some services, such as financial, medical and educational services, are exempt from VAT. 

Who can reclaim VAT?

If you are selling goods or services that are subject to VAT, or you are involved in qualifying activities, you can reclaim VAT.

To do this, you need to submit a VAT 3 return. However, you cannot reclaim VAT on goods or services used for making exempt supplies or for non-business activities.  
 
For costs that relate to both taxable and non-taxable activities, you can only reclaim the VAT portion related to your taxable supplies.  
 
It’s also worth mentioning that you have up to four years to claim a VAT repayment.

What VAT can you not reclaim?

You cannot reclaim VAT on the following costs, even if you are registered for VAT and make only taxable supplies: 

• Food, drink, or personal services for you, your agents, or employees (unless part of a taxable service) 

• Accommodation (unless related to a qualifying conference) 

• Food, drink, accommodation, or entertainment included in advertising costs 

• Entertainment 

• Passenger motor vehicles (except stock or qualifying vehicles) 

• Petrol (unless used as stock-in-trade) 

• Contract work involving non-deductible goods 

• Goods subject to a margin scheme 

• Costs for property used for non-business purposes 

Civil service mileage rates in Ireland

You can reimburse your employees for using their personal vehicles for business journeys. This does not include commuting from home to their normal place of work.

You have the option to either reimburse the actual travel expenses incurred by the employee or provide a fixed mileage allowance per kilometre. 

Here are the new civil service rates for mileage allowance in Ireland for 2025, effective from 1st September 2023. 

Civil service motoring and bicycle rates

Cars (rate per kilometre)

 

Motor travel rates (from 1 September 2022)

Distance band	Engine capacity up to 1200cc	Engine capacity 1201cc – 1500cc	Engine capacity 1501cc and over
Up to 1,500 km (Band 1)	41.80 cent	43.40 cent	51.82 cent
1,501 – 5,500 km (Band 2)	72.64 cent	79.18 cent	90.63 cent
5,501 – 25,000 km (Band 3)	31.78 cent	31.79 cent	39.22 cent
25,001 km and over (Band 4)	20.56 cent	23.85 cent	25.87 cent

For electric vehicles, mileage claims will follow the rate applicable to engine capacity 1201cc-1500cc.

 

Reduced motor travel rates per kilometre

Engine Capacity up to 1200cc	Engine Capacity 1201cc to 1500cc	Engine Capacity 1501cc and over
21.23 cent	23.80 cent	25.96 cent

Reduced mileage rates apply to work-related journeys that aren’t solely for job performance. Examples include attendance at approved courses or conferences. 

Motorcycles (rate per kilometre)

Motorcycle rates (from 5 March 2009) 

Distance	Engine capacity up to 150cc	Engine capacity 151cc – 250 cc	Engine capacity 251 cc – 600 cc	Engine capacity 601cc and over
Up to 6,437 km	14.48 cent	20.10 cent	23.72 cent	28.59 cent
6,438 km and over	9.37 cent	13.31 cent	15.29 cent	17.60 cent

Bicycles

Bicycle rates (from 1 February 2007

Rate per km

8 cent

If you’re interested in learning more about Civil Service Mileage Rates and how to calculate mileage claims click here.  

The civil service subsistence rates for 2025

Rates for assignments within the State

Overnight allowance

Domestic overnight subsistence rates (from 14 December 2023) 

Rate category	Rate
Normal rate	€195.00
Reduced rate	€175.50
Detention rate	€97.50

  

The overnight allowance applies to assignments lasting up to 24 hours. The assignment must be at least 100 kilometres from your employee’s home and regular workplace. 

The rate category is determined by the duration of the assignment:

• The normal rate applies for up to 14 nights.
• The reduced rate applies for the following 14 nights.
• The detention rate applies for each of the next 28 nights. 

For assignments exceeding 56 nights, your employee must apply to Revenue to confirm that subsistence is still available.

The period of subsistence at any single location is limited to six months. 

Day allowances

Domestic day subsistence rates (from 14 December 2023) 

Period of assignment	Rate
Ten hours or more	€42.99
Between five and ten hours	€17.92

 The assignment must be more than eight kilometres from your employee’s home and normal workplace. It’s also worth noting that they can only claim both a day and overnight allowance if they work five hours or more the next day. 

Rates for assignments outside the State

Short term assignment 

Subsistence rates for short term assignments 

Period of assignment abroad	% of normal overnight rate
First month	100%
Second and third month	75%
Fourth, fifth and sixth month	50%

 These rates can be applied to a single temporary assignment abroad lasting up to six months. 

Long term assignment

A long-term assignment lasts over six months. During the initial month, you can provide subsistence at the overnight rate to help your employee find self-catering accommodation. For the rest of the assignment, you can cover reasonable accommodation costs and 50% of the ten-hour day rate.

If you have remote working expenses

You can make a payment of €3.20 per workday to a remote working employee without deducting:

• Income Tax 
• Pay Related Social Insurance (PRSI)
• Universal Social Charge (USC)

This payment is to cover expenses incurred such as broadband, heating and electricity costs. 

And for expenses higher than €3.20 per workday 

Your employee’s daily expenses might go over €3.20, and you can reimburse them for these costs. However, if the amount exceeds €3.20 per workday, you need to deduct tax from it.  
 
Make sure to keep records of all the payments made.

What you need to know about Enhanced Reporting Requirements

Starting January 1, 2024, your finance teams in the Republic of Ireland must adhere to updated payment reporting regulations; known as Enhanced Reporting Requirements (ERR). These regulations enhance transparency in expenditure but present challenges for timely compliance. The new reporting requirements are introduced by Section 897C of the Finance Act 2022.

What needs to be reported?

 

1. Small benefit exemption: you need to report the date paid and the value of the benefit.

2. Remote working daily allowance: report the total number of days, amount paid, and date paid.

3. Travel and subsistence payments: report the date paid and amount for each payment under the following categories:

• Travel (vouched and unvouched) 

• Subsistence (vouched and unvouched) 

• Site-based employees (including ‘country money’) 

• Emergency travel 

• Eating on site

How to report this

• Payments must be reported to Revenue at the time of payment or in advance.
• Submit reports via the Revenue Online Service (ROS), either manually or using accounting or ERP software.

What you need to know about digital record-keeping

In Ireland, you can go paperless by storing receipts digitally instead of keeping paper copies.

However, you must follow certain requirements to comply with the rules on storing, maintaining, transmitting, reproducing, and communicating records electronically.

One example of these requirements is ensuring the scan quality is high enough for the receipt to be easily readable.

You can find all the necessary requirements in Revenue’s Electronic Storage manual. 

4 easy steps to comply with Revenue

Here’s a very brief overview of what you need to do to make sure your business is fully compliant:

Step 1: designate specific individuals at appropriate levels to approve expenses

• Make sure that each expense is reviewed and authorised by someone with the appropriate level of authority and responsibility within your organisation, thereby maintaining accountability and preventing misuse of funds. 

• Ensure even the highest-ranking employees submit their expenses for approval.
   

Step 2: maintain a traceable audit trail

• Use an expense management system that tracks every step of the process.

• Make sure that every expense is logged and traceable from submission to approval and reimbursement. 

Step 3: keep valid evidence

• Always obtain valid VAT receipts and credit card slips for expenses.

• Attach these receipts to the corresponding expense claims.

Step 4: find an expense management system that fully complies with Revenue’s regulations 

• It is essential to identify an expense management system. like Capture Expense, that ensures complete compliance with all of Revenue’s regulations.
  

By following these guidelines, you can ensure your business meets Revenue’s requirements and is prepared for an inspection. 

The expenses software for total Revenue compliance

Get all the features and functionality you need to keep your employee expenses compliant, in one central platform. Book a demo to see Capture Expense in action. 

We know why you’re here. You want the civil service mileage rates in Ireland for 2025. So, without further ado.  

The civil service mileage rates for 2025

Here are the new civil service rates for mileage allowance in Ireland for 2025, set by Revenue, effective from 1st September 2023.  

The rates vary depending on the type of vehicle, which includes cars, motorcycles, or bicycles. They also depend on the distance bands and the mileage allowance rate in euros per kilometre.  

Civil service motoring and bicycle rates

Cars (rate per kilometre)

Motor travel rates (from 1 September 2022) 

Distance band	Engine capacity up to 1200cc	Engine capacity 1201cc – 1500cc	Engine capacity 1501cc and over
Up to 1,500 km (Band 1)	41.80 cent	43.40 cent	51.82 cent
1,501 – 5,500 km (Band 2)	72.64 cent	79.18 cent	90.63 cent
5,501 – 25,000 km (Band 3)	31.78 cent	31.79 cent	39.22 cent
25,001 km and over (Band 4)	20.56 cent	23.85 cent	25.87 cent

For electric vehicles, mileage claims will follow the rate applicable to engine capacity 1201cc-1500cc. 

Reduced motor travel rates per kilometre 

Engine Capacity up to 1200cc	Engine Capacity 1201cc to 1500cc	Engine Capacity 1501cc and over
21.23 cent	23.80 cent	25.96 cent

Reduced mileage rates apply to work-related journeys that aren’t solely for job performance. Examples include attendance at approved courses or conferences. 

Motorcycles (rate per kilometre) 

Motorcycle rates (from 5 March 2009)  

Distance	Engine capacity up to 150cc	Engine capacity 151cc – 250 cc	Engine capacity 251 cc – 600 cc	Engine capacity 601cc and over
Up to 6,437 km	14.48 cent	20.10 cent	23.72 cent	28.59 cent
6,438 km and over	9.37 cent	13.31 cent	15.29 cent	17.60 cent

Bicycles

Bicycle rates (from 1 February 2007) 

Rate per km

8 cent

 

Staying compliant

Now, onto the nitty gritty.

In this guide, we’ll tackle the intricacies of car mileage allowance in Ireland for 2025. From what constitutes a business journey and how to calculate it, to submitting a compliant mileage claim.

Join us as we equip you with everything you need to know about civil service mileage rates in the Emerald Isle.
 

What is a business journey and how do you calculate it? 

A business journey refers to travel undertaken by an employee for work-related purposes. Specifically, when they travel from one place of work to another place of work as part of their duties.

This encompasses: 

• Travel between different countries, such as between Ireland and other countries. 
• Travel to a location that is not their usual place of work.

It’s worth noting that a business journey does not include commuting from home to the normal place of work and vice versa; this is considered private travel.

 Calculating the distance for business travel 

When calculating the distance for business travel, the relevant distance is the lesser of: 

• The distance between the employee’s home and the temporary place of work. 

• The distance between the employee’s normal place of work and the temporary place of work. 

Let’s take a look at an example: 

Imagine that the distance from your employee’s home to a temporary workplace is 50 km. And that the distance from their normal workplace to the temporary one is 30 km.

The business travel distance will be: 30km (the lower of the two distances). 

What’s not included in the mileage allowance?

Not all trips are eligible for reimbursement under the civil service mileage rates in Ireland.

The most common trips which aren’t included are

• Personal trips that aren’t directly related to your employee’s job. 
• Trips between your employee’s home and their regular workplace. 

How to submit a mileage allowance claim in Ireland

To be reimbursed for business-related vehicle expenses, your employees must complete a claim form provided by the company or Revenue. They must also submit evidence of the journeys made in their personal vehicle.

Your employees should keep the following evidence: 

• Receipts for petrol 
• Receipts for parking tolls 
• Any additional receipts pertaining to vehicle usage 
• Addresses visited during travel 
• Purpose of each journey 
• Recorded kilometres driven to and from business travel destinations

You must maintain accurate records of all your employees’ claims and provide full evidence to ensure compliance and avoid issues with Revenue.

It’s worth noting that if you have already reimbursed an employee’s expenses at civil service mileage rates, no additional tax relief will be applicable to the employee. 

How to keep track of your mileage expenses 

It’s essential for both you and your employees to maintain precise records of all work-related trips.

Failure to do so could result in Revenue requesting that these payments be treated as taxable income.

The required records include:  

• Name 
• Address(es) visited during travel 
• Date(s) of the work trip 
• Purpose of the journey  
• Distance travelled 
• The trip’s originating point, planned destination, and final destination 
• Documentation for reimbursement (e.g., receipts or mileage rate) 

FAQs

What is classed as normal place of work?

The normal place of work is where employees usually carry out their job duties. It’s typically where the employer provides the necessary resources for them to work. This might vary depending on the employee’s role. Generally, the normal place of work is not considered the same as where the employee lives. This is unless there’s an objective requirement for them to work from home because their tasks cannot be done elsewhere. If an employee chooses to work from home or if the tasks performed there are minor or administrative, it’s not considered their normal place of work. 

Are sole traders eligible to claim mileage?

Sole traders are not eligible to claim mileage using the civil service mileage rates. Instead, they can only claim for the actual expenses they incur, such as fuel, motor tax, motor insurance, hotels, and related expenses. To do this, sole traders should keep detailed receipts for the business portion of these costs. This ensures that their claims are accurate and compliant with tax regulations. 

Do the civil service mileage rates apply to emergency travel?

Yes, the civil service mileage rates do apply to emergency travel.

When an employee needs to work outside their normal hours to address emergencies requiring immediate attention, you can repay their travel expenses. This includes mileage, which can be reimbursed using the civil service mileage rates.

This reimbursement is tax-free and can be claimed for up to 60 emergencies per year. However, it does not apply to non-emergencies such as covering for absent staff, handling increased workloads, or attending routine events. 

Do the civil service mileage rates apply to voluntary work? 

Yes, organisations with altruistic and non-commercial functions, such as registered charities or sports bodies, can repay travel expenses to individuals working voluntarily and unpaid.  

These expenses are tax-free as long as they are necessary for the individual to perform their work and do not exceed the actual costs incurred. However, the payments must not exceed the civil service rates.

Never miscalculate mileage claims with Capture Expense

Capture Expense ensures compliance with Ireland’s civil service mileage rates by managing cumulative mileage bands and automatically calculating the correct reimbursement rates based on fuel type, engine size, and distance travelled.  

Our platform seamlessly integrates with Google Maps to accurately calculate your employees’ travel distances. It automatically selects the shorter route from either your employee’s home or their normal place of work. This ensures full compliance with Revenue’s guidelines. 

Allow your people to raise, submit and approve their vehicle expenses at any time, from any location through the Capture Expense app and streamline the way your organisation manages spend. Book your personalised demo now.  

Did you know that your employees can claim back hours spent on the road? 

Providing mileage allowance for employees who drive for work has become more popular in recent years. However, with HMRC’s many rules and updates, understanding how this process operates can be confusing for both you and your employees. 

This blog aims to offer a complete guide on everything you need to know regarding HMRC mileage reimbursement rates in 2025.

What is HMRC’s mileage allowance?

Car allowance mileage rates allow employees to claim back vehicle expenses for business purposes, covering costs like petrol, road tax, and insurance. Instead of individually calculating wear and tear on each vehicle, HMRC uses standard pence per mile expenses called ‘Mileage Allowance Payments’ (MAPs).  
 
This deduction applies to any employee using their vehicle for business. The purpose is to align with tax regulations, ensuring business costs are tax-deductible and not subject to tax when incurred from a personal account. 

How much is the HMRC 2025 mileage allowance?

With the HMRC set mileage allowance, the same rate is applied for every employee, depending on the type of vehicle they use.  

Type of vehicle	10,000 miles	10,000 + miles
Cars and vans	45p	25p
Motorcycles	24p	24p
Bikes	20p	20p

 

Calculating business mileage is straightforward. All you need to do is multiply the miles travelled by the mileage rate for your vehicle.

For instance, if an employee travels 18,000 business miles in their car, the mileage deduction for the year would be £6,500 (10,000 miles x 45p + 8,000 miles x 25p)

It’s also worth noting that if they travel with colleagues from the same company, the driver can claim an extra 5p per mile per passenger.  

 

Let’s take a closer look at each milage allowance  

 

HMRC mileage reimbursement rates for cars and van

The HMRC-approved mileage rate for cars and vans is £0.45 per mile for the first 10,000 miles per year. After that, it’s £0.25 per mile

For example, if your employee drove 19,000 miles for work this year, they’d receive:

• £4,500 for the first 10,000 miles (10,000 x £0.45) 
• £2,250 for the next 9,000 miles (9,000 x £0.25

For a total reimbursement of £6,750

Hybrid cars follow the same standard rates, while electric cars have a fixed rate of £0.05 per mile, with no limit on mileage. 

 

HMRC mileage reimbursement rates for motorcycles

If your employee owns a motorcycle, they’re eligible to receive £0.24 per mile when driving for business purposes.

Unlike cars and vans, motorcycles are not subjected to the 10,000 miles limit, which means that going above this threshold does not change the 24p rate.

For example, if your employee drove 5000 miles for work this year on their motorbike, they’d receive

£0.24 x 5000 = £1,200 in tax-free reimbursement.  

HMRC mileage reimbursement rates for bicycles

Those who own bicycles might not be paying for fuel, but still incur costs such as insurance, as well as general wear and tear during use. The government recognises this and awards £0.20 per mile for an unlimited amount of business-related mileage.

For example, if your employee cycled 450 miles for eligible business trips this year, they’d receive

£0.20 x 450 = £90 to in tax-free reimbursement. 

What journeys can employees claim mileage on?

Whether your employees drive to work frequently or occasionally, it is worth keeping track of their mileage and understanding what trips qualify to be exempt from taxes, and which do not.

Business journeys employees can claim:

• Travelling from one office to another. 
• Travelling to a temporary location to conduct business (i.e., meeting a client or attending an event).

Business journeys employees can’t claim:

• The daily commute to a permanent office. 
• Travelling to a location very close by. 

• Any travel undertaken for private purposes, even if work-related activities such as making calls or running errands are included.

The only tax-free method for reimbursing business miles is through the approved mileage allowance. Giving an employee a company car or a fixed sum towards petrol will both be taxed, so be aware here.   
 
Other travel expenses like parking charges and road tolls while using a company vehicle are covered under subsistence expenditure, not the mileage allowance. 

 

What are HMRC advisory fuel rates? 

HMRC advisory fuel rates apply to company-owned cars and serve two main purposes:

1. Reimbursing employees for business travel expenses incurred in a company car. 
2. Managing reimbursements when employees use the company car for personal travel and need to repay the business. 

Company car fuel rates are reviewed every three months and can change based on actual fuel rates. You can only rely on the previous rates for up to one month before switching to the current rates.

HMRC fuel rates are influenced by factors like engine size, manufacturer data on miles per gallon, current fuel prices, and the calculated rate per mile

If your employee is using a hybrid car, it’s treated like a petrol or diesel car. But if they’ve got a fully electric vehicle, they are reimbursed at £0.09 per mile. 

The following tables were taken from HMRC. They’re provided with the purpose of breaking down exactly why fuel rates are at their current numbers: 

 Petrol 

Engine size (cc)	Mean MPG	Fuel price (per litre)	Fuel price (per gallon)	Rate per mile	Advisory fuel rate
Up to 1400	51	134.4 pence	611 pence	12 pence	12 pence
1401 to 2000	42.3	134.4 pence	611 pence	14.4 pence	14 pence
Over 2000	27.1	134.4 pence	611 pence	22.6 pence	23 pence

 

Diesel  

Engine size (cc)	Mean MPG	Fuel price (per litre)	Fuel price (per gallon)	Rate per mile	Advisory fuel rate
Up to 1600	56.9	139.8 pence	635.7 pence	11.2 pence	11 pence
1601 to 2000	49.3	139.8 pence	635.7 pence	12.9 pence	13 pence
Over 2000	38	139.8 pence	635.7 pence	26.7 pence	17 pence

 

LPG (Liquefied Petroleum Gas) 

Engine size (cc)	Mean MPG	Fuel price (per litre)	Fuel price (per gallon)	Rate per mile	Advisory fuel rate
Up to 1400	40.8	98.3 pence	446.9 pence	10.9 pence	11 pence
1401 to 2000	33.8	98.3 pence	446.9 pence	13.2 pence	13 pence
Over 2000	21.7	98.3 pence	446.9 pence	20.6 pence	21 pence

In reality, only the size of the vehicle’s engine and its equivalent price per mile matter.

Let’s consider an example where your business owns a company car.

The car has a 1000cc petrol engine, an employee pays for fuel for 3000 business miles per year. Additionally, the same employee uses the company car for personal use for 800 miles per year.

Using HMRC’s advisory fuel rates for petrol cars with engines up to 1400cc at £0.12 per mile:

• £0.12 x 3000 miles = £360 for business use. 
• £0.12 x 800 miles = £96 for personal use.
   

Therefore, your business can claim £360 from HMRC through the fuel advisory for 2025, and you can also recoup £96 from the employee for personal use. 

 

FAQs 

 

What vehicles are eligible for mileage allowance? 

Employees are eligible to receive mileage allowance payments for any vehicle they own and have registered with the DVLA, such as cars, vans, motorcycles, scooters, and bicycles, provided these vehicles are used for work purposes. 

When do you need to report HMRC mileage reimbursement rates?

If an employee travels over 10,000 miles, you must report it to HMRC using form P11D. Paying employees more than the approved amount of 45p per mile is also considered a benefit and must be reported on a P11D and taxed. 

What’s the best way to reimburse your employees in 2025? 

Tracking and calculating individual mileage allowances for employees, especially for SMEs with company cars, can be tedious. However, expense management software like Capture Expense, uses accurate reimbursement features to simplify this process by automatically calculating mileage based on journey data and HMRC figures, saving time and effort.

 

Ready to streamline your mileage allowance process?

Book a demo with Capture Expense today and discover how our software simplifies tracking, calculating, and reimbursing mileage while ensuring compliance with HMRC mileage reimbursement rates.  

Most people love the perks of travelling for work—new places, new faces, and maybe even the occasional upgrade—but let’s face it, nobody enjoys the paperwork that follows.  

Fortunately, HMRC’s subsistence rates make claiming meal allowances a lot simpler for everyone involved.  

For employees, they eliminate the need to meticulously track and save every single receipt from their work trips (because they can claim a set amount for meals and snacks instead). 

For employers, the process is streamlined too. With clear, standardised rates, there’s no need to cross-check endless receipts or worry about overcomplicated expense claims. 

If you’re new to HMRC meal allowances, you’re in good hands. We’ll outline exactly what they are, the rates for 2025, and how to report them.

What is an HMRC meal allowance? 

The HMRC meal allowance, often called a “subsistence allowance,” is a set amount of money you can claim back from your employer (or company) when you’re working away from your usual place of work. It’s meant to cover the cost of meals, like lunch or dinner, during business trips or situations where you’re required to travel for work. 

The key is that the expense has to be “reasonable” and meet HMRC guidelines—so you can’t go all out on a five-course meal at a fancy restaurant, unless it’s within the limits set by your company’s expense policy. 

When do HMRC subsistence rates apply?

 HMRC subsistence rates apply when: 

• You’re travelling away from your usual workplace for business purposes.
• Your business trip requires you to be away for a significant part of the day or overnight.
• You end up with extra costs, like meals or accommodation, because of the travel. 

Imagine you work in sales and have a client meeting in another city. You leave early in the morning and return late at night. During this time, you buy lunch at a café and dinner at a restaurant because you can’t go home to eat.  

You can claim these meal expenses as part of HMRC’s subsistence allowance, as long as they’re reasonable and meet the set guidelines. 

Is meal allowance taxable in the UK? 

No, meal allowances aren’t taxable in the UK. This has been the case since 1998, which means businesses can deduct these costs from their taxable income—potentially leading to lower tax payments. 

Are there scenarios where meal allowances can’t be deducted?

Yes, meal allowances can’t be deducted if:

• The expenses aren’t directly related to business activities. 
• No actual meal or drink is bought. 
• The meals are included as part of a training course, conference, or similar. 
• The expenses are deemed excessive or lavish. 
• The meals aren’t documented, or receipts are unavailable. 

The HMRC meal allowance rates for 2025

Here are the HMRC meal allowance rates for work-related travel within the UK: 

Minimum journey time	Maximum meal allowance
One meal (5 hours)	£5
Two meals (10 hours)	£10
When working after 8pm	£15
24-hour period	£25

You can claim up to £25 in total for meals over a 24-hour period. This covers all meals, with a breakdown of £5 for breakfast, £5 for lunch, and £15 for dinner.

For example: if you’re on a work trip and spend £4 on breakfast, £5 on lunch, and £12 on dinner, you’d still be within the £25 daily limit, since dinner can go up to £15. 

What about overnight stays?

If you’re required to stay overnight for business purposes (within the UK), you can claim up to £25.00 to cover incidental expenses. This could include costs such as parking fees at the accommodation, or Wi-Fi charges for personal use. 

International meal allowance rates for 2025 

If you’re travelling outside of the UK for work HMRC has a full list of recommended allowance rates by country. 

Here are a few examples of daily meal allowances in different countries, listed in their local currencies: 

Hong Kong  

Expense	Rates
Lunch	HKD 253
Dinner	HKD 429.50
24-hour rate	HKD 816.50 (plus room rate)

Singapore 

Expense	Rates
Lunch	SGD 79
Dinner	SGD 102.50
24-hour rate	SGD 218 (plus room rate)

France (Paris) 

Expense	Rates
Lunch	€35.50
Dinner	€42
24-hour rate	€117 (plus room rate)

Spain (Madrid) 

Expense	Rates
Lunch	€29.50
Dinner	€51.50
24-hour rate	€114.50 (plus room rate)

USA (New York) 

Expense	Rates
Lunch	$27
Dinner	$42
24-hour rate	$102.50 (plus room rate)

How to report meal allowance to HMRC 

The process for reporting meal allowances to HMRC is the same as how you would report your other business expenses.  

At the end of the tax year, you’ll complete a P11D form for each employee who received meal reimbursements. This form details all the expenses that were paid to your employees.  

Additionally, you might need a P11D(b) form to summarise the total expenses and work out any Class 1A National Insurance contributions due. 

You can find a complete guide to reporting expenses and benefits on the HMRC website. 

Also, keep in mind that starting from April 2026, all benefits in kind (including meal allowances) will need to be reported and taxed directly through payroll. 

What happens if you go over HMRC meal allowance rates? 

Let’s look at a real-world example to make it easier to understand. 

 Imagine Sarah, who works for a tech company, and she’s travelling for work in the UK.  

 Her company follows the HMRC meal allowance rates for 2025 (which are £25 per day). On her trip, Sarah spends £35 on a meal—so it’s over the HMRC’s standard allowance by £10.

The company has two options in this situation: 

1. Stick to the £25 HMRC rate: if the company chooses this option, they’ll only reimburse Sarah £25 for her meal. That means Sarah will have to cover the £10 difference herself. This is the simpler approach, as there’s no need for the company to worry about any additional tax or national insurance implications.
    
2. Reimburse the full £35: if the company wants to reimburse Sarah the full £35 (the actual cost of the meal), that’s where things get more complicated. The company would have to make sure they’ve agreed on a higher, bespoke scale rate with HMRC. If they haven’t done this, then the £10 excess over the £25 is considered taxable income, and it would be subject to tax and national insurance.  

Want to keep all your expenses, including meal allowances, in one place? 

Whether you follow HMRC’s meal allowance rates or set your own limits for your employees, with Capture Expense you can easily submit, track, and manage all your expenses. Book a demo today to see just how easy it is. 

Imagine this; you’re a project manager heading to Edinburgh for an important business meeting. You’ve booked a train, lined up your hotel stay, and are preparing to grab meals on the go.  

These are all necessary expenses for your trip. But did you know that in the UK, you might be able to claim these costs back under what’s called a “subsistence allowance”?  

Whether you’re footing the bill yourself or your company is reimbursing you, it’s important to understand what qualifies as a legitimate business expense and how to claim it properly. 

Let’s get you ready for your next business trip by breaking down the key things you need to know about subsistence allowance in the UK. From what’s included to what’s not, and how to report a claim, we’ve got you covered—so you can focus on your work without worrying about out-of-pocket expenses. 

What is a subsistence allowance in the UK?

Subsistence allowance in the UK refers to expenses that employees can claim for costs incurred while traveling for work, such as meals, accommodation, and travel.  

HM Revenue and Customs (HMRC) allows these claims to cover necessary, business-related expenses, provided they meet specific guidelines and are not part of the employee’s regular, everyday costs. 

When can you claim subsistence allowance in the UK?

Let’s stick with the same example as before. As a project manager, your job involves travelling to meet clients across the UK.

One day, you have a meeting scheduled in Manchester, (your usual office is in Birmingham). To make it to your meeting on time, you catch an early train, grab breakfast on the go, and then later buy lunch while you’re in Manchester before heading back.

Now, can you claim these food expenses as a subsistence allowance? Yes, in this scenario, you likely can!

Here’s why:

1. The expense is necessary for your work duties: travelling to Manchester is part of your job responsibilities, so any reasonable costs incurred while doing this are necessary for work.
    
2. It’s an additional cost: if you hadn’t been travelling for work, you wouldn’t have had to spend extra money on breakfast and lunch in a different city. These are costs over and above your usual daily expenses.
    
3. You have receipts: always keep your receipts. Whether it’s a coffee shop receipt for breakfast or a restaurant bill for lunch, they’re essential to verify your claim.
    
4. You’re away from your usual place of work: since you’re not working from your Birmingham office and had to travel to Manchester, these expenses fall under the criteria of being away from your normal workplace.

It’s important to note that the costs you claim must be reasonable. For instance, a modest lunch in Manchester would be acceptable, but a lavish dinner at a high-end restaurant might raise eyebrows with HMRC.

Are there any exceptions? 

Yes. Here are some examples of situations where you might be exempt from claiming a subsistence allowance in the UK:

• When your employer provides meals (during the trip) 
• When the trip is for personal reasons (even if there’s a minor business component) 
• When the expenses are excessive 

The subsistence allowance rates in the UK 

Here are HMRC’s daily subsistence allowance rates in the UK for 2025:

Meal subsistence rates in the UK

Employee subsistence rate	Maximum limit
One meal (5 hour) ceiling	£5
Two meal (10 hour) ceiling	£10
Three meal (12 hour) ceiling	£15
24-hour ceiling	£25

Accommodation rates in the UK

Location	Maximum limit
London	£130
Bristol	£100
Warrington	£90
Reading	£85
All other locations (UK based)	£75

What about mileage rates? 

While your employees can’t claim back the actual hours they spend driving for work, they can claim mileage allowance to cover the costs of using their own vehicle. HMRC’s mileage allowance rates are designed to compensate for fuel, wear and tear, and other expenses, helping employees offset the costs of business travel.

Here are the approved mileage rates for 2025: 

Type of vehicle	10,000 miles	10,000 + miles
Cars and vans	45p	25p
Motorcycles	24p	24p
Bikes	20p	20p

The subsistence allowance rates outside the UK 

If you’re travelling abroad for work, HMRC provides subsistence rates in local currencies for different countries and cities. 

Here are some of the most popular destinations in 2025: 

Country	Expense	Rates
United States	Meals	$21 – $34.50
	Accommodation	$216 – $239
Canada	Meals	$38.50 – $47
	Accommodation	up to $224
European countries	Meals	€22 – €40
	Accommodation	averages €199.50
Singapore	Meals	SGD 91.50
	Accommodation	SGD 318
Hong Kong	Meals	HKD 292.50
	Accommodation	HKD 2376.50

How to report UK subsistence allowance spending to HMRC 

Reporting subsistence allowance to HMRC is fairly straightforward and follows the same process as reporting other work-related expenses.  

At the end of the tax year, you need to complete a P11D form for each employee who received reimbursements for expenses (like meal allowances). Additionally, a P11D(b) form may be required to summarise the total expenses and calculate any necessary Class 1A National Insurance contributions. 

It’s also worth noting that from April 2026, all benefits in kind (BIK)—except for loans and living accommodation—must be reported and taxed through payroll. Which means that you’ll no longer be able to process BIKs through P11Ds.  

To make sure everything runs smoothly, you should have a clear process in place for collecting, verifying, and recording your expenses.  

Say hello to Capture Expense 

Want to keep all your expenses, including subsistence allowance in the UK, organised and in one place?  

Book a demo with Capture Expense today and see how easy it is to submit, track, and manage your expenses—saving you time and keeping you compliant with HMRC. 

There’s nothing quite like a business trip. Exploring new cities, meeting interesting people, and learning new things. It’s a great way to break up the monotony of the daily grind and add some excitement to your work life. 

But let’s be honest. Nothing quite kills that refreshed, post-trip feeling like coming home to the task of filing a travel expense report. All those receipts, mileage logs, and itemised lists can feel tedious. Necessary? Absolutely. Exciting? Not so much. It’s the paperwork price you pay for all those moments of professional adventure. 

What if we told you that you could manage all your travel and expenses (T&E) in a matter of minutes? What if we told you the whole process could be fully digitised and automated?

Now that we’ve got your attention. Let’s look at what T&E means, some key examples and how you can streamline your entire travel and expense management process.  

What does T&E mean?

T&E refers to the costs incurred by employees or individuals when traveling for business purposes. These expenses typically include transportation, accommodation, meals, and other incidental costs necessary to carry out their work-related duties while away from their usual workplace. 

T&E examples

There’s a lot that can fall under the umbrella of T&E. Let’s break it down:

Transportation 

This includes the big things, like booking flights, train tickets, or renting a car to get to your destination. It also covers smaller, day-to-day transport expenses like taxi rides, parking fees, or public transport passes if you’re getting around in a city.

Accommodation

Your stay is a key part of the budget, whether it’s a hotel, serviced apartment, or Airbnb. Beyond the nightly rate, it might also include any Wi-Fi fees or charges for using business facilities, like meeting rooms—make sure you make it clear in your T&E policy whether this will be included, or comes at the employees own cost.

Meals

Everyone’s got to eat, right? This includes dining out at restaurants, grabbing a quick bite at a café, or ordering room service. Don’t forget about snacks and drinks during the day or those team dinners that turn into great networking opportunities. There’d usually be a set spend limit on how much an employee can claim depending on length of their trip and what meal of the day it is; so make sure this is totally clear before you go out for that gourmet, 3-course meal.

A real-world example

Imagine you’re a sales rep for a tech company. You’re scheduled to fly to San Francisco for a big three-day conference. You book your flight, reserve a hotel room, and rent a car to get around the city. While you’re there, you’ll need to cover the cost of meals and any additional transportation expenses.  
 
All of these costs combined would be considered T&E expenses. 

6 T&E challenges and how to solve them

Manual processes 

Processing your travel and expenses manually might seem manageable at first, but it quickly becomes a bottleneck as your business grows. Manual processes are time-consuming, prone to errors, and can lead to your finance teams spending excessive time reviewing claims.

The solution: you should consider automating your entire travel and expense process with a sophisticated expense management system like Capture Expense. It will help you streamline everything from receipt capture and expense submission to policy enforcement and approval workflows—saving time and providing greater control over your expenses. 

Policy non-compliance 

This is a major challenge in managing your travel and expenses because it can lead to overspending and inconsistent claims for your business. Sometimes your employees may not fully understand the policies, or they might accidentally—or even deliberately—submit claims that don’t align with company guidelines.  

So, if you’re wondering whether you need a corporate travel policy. The answer is yes. A robust T&E expense policy is like a roadmap for your business trips. It sets clear guidelines on what expenses are reimbursable, how much you can spend, and what kind of documentation is required.

To help you get started, you can download our free corporate travel policy template. 

Lost receipts 

When it comes to T&E expenses, lost receipts are a huge headache for everyone involved. Your employees can’t claim reimbursements without proof of purchase, your finance teams can’t process the expense, and your managers end up chasing people for missing details.

So, why does this happen so often? Think about it—when you’re traveling, you’re juggling trains, meetings, meals, and taxis. Receipts get crumpled, misplaced, or accidentally tossed out. If you’re relying on manual systems, the problem only gets worse because there’s no backup unless someone took the time to snap a photo or make a note.

The solution? Whether you’re handling finances manually or digitally, it starts with making it easy to capture receipts right away. If you’re sticking to a manual process, encourage your employees to use their phones to take pictures of receipts the moment they get them. For a truly effective solution, though, modern expense management apps are the way to go. They let your employees snap, upload, and categorise receipts in seconds, even while they’re on the move. The data is automatically synced to your accounting system, so there’s no risk of losing it—and no more chasing people for missing paperwork. 

Budget overspending 

Overspending can spiral out of control fast. A little extra here for a last-minute hotel upgrade or an unplanned meal there might seem harmless, but multiply that across dozens of employees and trips, and you’ve got a major dent in your budget.

The problem usually comes down to a lack of visibility and control (but more on that later). If your employees don’t have clear spending limits or real-time guidance on what’s allowed, they might unintentionally exceed budgets. And if your finance teams only see expenses after the trip is over, it’s too late to fix the problem.

The way to deal with budget overspending is proactive planning and real-time oversight. Start by setting clear budgets and policies for travel expenses, so your employees know exactly what’s acceptable.  

Consider bringing in a tool that helps enforce those guidelines in real time. Robust expense management platforms can flag out-of-policy spending instantly, give your employees budget updates on the go, and even alert your managers if someone’s about to exceed limits.

This way, you’re not just reacting to overspending—you’re preventing it before it happens. 

Delayed reimbursements 

Imagine spending your own money on a work trip—flights, meals, taxis—only to wait weeks or even months to get it back. It’s frustrating, especially if the expenses were significant.

For your finance teams, delayed reimbursements are a sign of inefficiency. Processing piles of expense reports, chasing missing receipts, and manually checking for policy compliance takes forever. The longer it takes, the harder it is to manage cash flow and keep your employees happy. 

So, what’s the answer? It all comes down to speed and automation. An expense management system can simplify your entire process. Employees can submit expenses in real time—by snapping a photo of a receipt—and finance teams get all the data they need in one place.  

Poor visibility into spending patterns 

Think about trying to manage all your company’s finances with a pen and paper. It’d be a lot of work, and easy to make mistakes. That’s kind of what it’s like using manual spreadsheets or legacy software for your T&E expense reports.

These outdated methods can’t automatically check if your expenses are within policy limits or if you’ve got the right receipts. It’s all up to you to do the calculations and spot any errors. And let’s be honest, human error is inevitable.

You’re in luck because the solution here, is the same one as all the others: a modern, fully automated expense management system. Tools like Capture Expense can automatically categorise expenses, flag policy violations, and generate accurate reports in real time.  

Are you looking for a platform that can streamline your entire T&E process?

With just a few taps, you can capture receipts, automate employee reimbursements, and manage everything else with ease. Book a demo today and see how we can help streamline your entire T&E process.

Having a corporate credit card is great. You can tap away, and purchases are charged directly to your company’s account.  

But sometimes — especially if you run a smaller business — you won’t have corporate cards, and in that case, you’ll have to pay for business expenses yourself (or “out-of-pocket”). 

The downside of paying for things out of pocket (besides the obvious) is that the logging, tracking and reimbursing of these costs can be time consuming.

That’s why you need to have a good system in place, so all these little expenses don’t turn into big headaches down the line.

Let’s start with a definition for out of pocket expenses and work our way to successfully managing them.

What are out-of-pocket expenses?

Out of pocket expenses are costs you pay yourself for work-related activities. Think of them as money you spend upfront, often with the expectation of being reimbursed later.

Common examples of out-of-pocket expenses

Here are some common examples of out of pocket expenses:

• Work-related travel costs: like paying for fuel, parking, or tolls during a business trip.
• Meals: grabbing lunch or dinner for a client, or while travelling for work.
• Office supplies: picking up stationary, notebooks, or other essentials when your company runs out.
• Accommodation: costs for hotel stays or other forms of accommodation during business trips.

Basically, it’s anything you pay for upfront that someone else is supposed to cover later! That’s right, the examples are endless. 

Let’s look at a real-world scenario

Imagine you’re travelling for a work conference in another city. Your company’s travel department has booked your flight and hotel, but when you arrive at the airport, you realise you’ll need to take a taxi to the hotel. You pull out your wallet and pay for the ride yourself since it’s not prepaid.

Later, you keep the receipt and submit it to the travel department for reimbursement. That taxi fare is an out-of-pocket expense because you paid for it upfront, even though it’s technically a business expense. 

How to manage out–of–pocket expenses

First things first, you need to ask yourself whether you plan on managing your out of pocket expenses digitally or manually. There are pros and cons to each method (which we’ll cover shortly) but generally if you can digitise any part of your workflow, it’s usually worth doing.

Digital vs manual: how should you manage your out–of–pocket expenses?

 

Managing your out–of–pocket expenses digitally

Pros	Cons
Convenience: you can track your expenses on the go with just a few taps on your phone. No need to carry around notebooks or receipts.	Costs: while many apps are free, some of the more advanced features or premium versions come with subscription fees.
Organisation: digital tools often categorise expenses automatically (e.g., meals, travel), making it easier to understand where your money is going.	Learning curve: some apps can be tricky to set up or use, especially if you’re not tech-savvy.
Accuracy: you’re less likely to forget an expense since you can log it in real time. Plus, the calculations are automated, so no human errors.	Potential for overcomplication: if you’re not careful, you might end up spending more time fiddling with the app than actually managing your finances effectively.
Access to insights: many apps provide spending trends, budgeting tools, or even advice to help you save money.
Eco-friendly: less reliance on paper receipts or physical records is better for the environment — which is always a bonus.

Managing your out–of–pocket expenses manually

Pros	Cons
No tech needed: no need for apps, phones, or internet. A pen and notebook (or even receipts in an envelope) are all you need.	Time-consuming: let’s face it—tracking everything by hand can be a bit tedious, especially if you have a lot of small transactions.
Simplicity: for some, writing things down feels more straightforward than navigating through digital menus and options.	Prone to errors: it’s easier to miscalculate or forget to log an expense if you’re doing it manually.
Mindful spending: the act of writing each expense down can make you more conscious of your spending habits.	No automated insights: you miss out on features like expense categorisation, or spending trends that digital tools provide effortlessly.
	Not portable: carrying a notebook everywhere can be inconvenient compared to using a smart device.

Let’s look at the steps you need to take to manage your out of pocket expenses effectively:

Step 1: Record your out-of-pocket expenses as soon as they happen

Don’t let your receipts stack up—it’s a disaster waiting to happen.

If you’re using a sophisticated expense management platform like Capture Expense, all you have to do is snap a photo of your receipt, and let the software do the heavy lifting for you. It’ll extract all the necessary details and send them straight to your accounting system.

Prefer manual entry? That’s okay too! Just make it a habit to jot down expenses as soon as you can—whether in a notebook or spreadsheet. 

If immediate logging isn’t realistic (even if it’s just a case of taking a quick picture), set a weekly or monthly calendar reminder to process your expenses.

Step 2: Categorise your business expenses

Categorising your business expenses is key. Think of it like sorting your clothes into different drawers. You wouldn’t just throw everything into one pile, right?

Here’s how to categorise your expenses:

1. Create a system: divide your expenses into different categories that are specific to your industry and the way you do things. 
2. Stay consistent: once you’ve established your categories, stick to them. This will make it easier to track your spending and identify trends. 
3. Use software to automate the entire process: while some providers offer this service, Capture Expense’s AI-powered matching feature is a game-changer when it comes to categorising your expenses. Whenever you upload receipts, or process corporate card transactions in the app, it automatically assigns the correct expense category.  

Some common examples of business expense categories

Here are some of the most common business expense categories. Pick and choose which ones you think will be a good fit for your specific company:

• Travel    
• Meals and entertainment 
• Advertising and marketing  
• Office supplies   
• Utilities   
• Employee benefits    
• Training and development  

Step 3: Keep track of all your receipts 

Don’t let your receipts slip through the cracks! Whether it’s a physical receipt or a digital one, make sure to keep them safe.

They’re your proof of purchase and are crucial for:

• Reimbursements: if you’ve paid out of pocket, the receipt is what you’ll use to get your money back.
• Tax time: if you’re deducting business expenses, HMRC might ask to see proof. Without receipts, you could lose out on valid deductions.
• Audits: no one likes the word, but audits happen. Keeping receipts guarantees you’ve got all your ducks in a row if your finances are ever questioned. 

Step 4: Consider prepaid or company credit cards

Let’s talk about why prepaid or company credit cards can be a game-changer for managing out of pocket expenses.

Here’s the thing: paying for work-related stuff with your own money can get messy. You’re dipping into your personal funds, trying to remember what needs reimbursement, and it can take forever to reconcile everything. That’s where prepaid or company credit cards come in. 

Here are 4 reasons why you should consider them:

No more out-of-pocket spending

Imagine this, instead of paying for that client lunch or travel ticket from your own pocket, you just use the company card. No personal funds are involved, so there’s no waiting around for reimbursement.

Better cash flow management

Prepaid cards, in particular, let you load a set amount of money each month. It’s like giving yourself or your employees a spending allowance that’s easy to track. Plus, since it’s prepaid, there’s no risk of overspending.

Simpler tracking

Every transaction on the card is automatically recorded. You can pull up the statements to see exactly what’s been spent and where—no more hunting through receipts or cross-referencing expenses with personal accounts.

Reduces admin burden

If you’re managing a team, prepaid or company credit cards eliminate the need for employees to pay out of pocket and then submit reimbursement forms. It streamlines the whole process.

For example

Say you run a small business and one of your employees needs to buy materials for a project. If they use their own money, they’ll need to file an expense claim, provide receipts, and wait for reimbursement—meanwhile, you’re stuck processing all of it. 

Now, if they have a prepaid card loaded with £500 for project expenses, they can use that directly. No personal money involved, no reimbursement headaches, and you’ve already capped how much they can spend. 

Things to watch out for

• For prepaid cards: make sure you top them up as needed and monitor balances to avoid any “insufficient funds” hiccups.
• For credit cards: pay the balance in full each month to avoid interest charges. And if multiple employees are using them, set clear spending guidelines to prevent misuse. 

Step 5: Review your out-of-pocket expenses  

Reviewing your out of pocket expenses regularly is like giving your finances a quick health check—it helps you stay on top of things and avoid surprises. 

Catch forgotten expenses 

It’s easy to forget small things like a coffee for a client meeting or a parking fee. When you sit down regularly (say, once a month), you can check receipts, bank statements, or your expense management app to make sure nothing’s been missed. 

Spot patterns in spending

When you review expenses, you start to see where your money’s going. Are you spending more than expected on travel? Is your coffee budget out of control? Regular reviews let you spot trends and decide if adjustments are needed. 

Stay prepared for taxes or audits

Keeping everything up to date means that when tax season rolls around (or if there’s ever an audit), you’ve got your expenses clearly documented. No scrambling for receipts or trying to remember what that £30 charge was for six months ago. 

Are you on the lookout for an app that can simplify and automate your out-of-pocket expenses?

If managing out of pocket expenses feels like a chore, Capture Expense is here to change that. With our app, you can snap receipts, categorise expenses, and let the automation handle the rest—no more manual logging or misplaced receipts.

Book a demo today to see how we can save you time, simplify your process, and give you back control of your finances.  

 

Did you know 43% of senior finance leaders are very concerned about HMRC inspections? 

That means that nearly half of all CFOs, Finance Directors, and Heads of Finance feel apprehensive or underprepared for an unexpected visit from the taxman. 

And maybe that’s partly because expense compliance in the UK is complex, and can be time-consuming. But the trick is having a robust policy in place to make staying compliant just that little bit easier.

Now before you can create your company expense policy, and implement processes for complying with HMRC, you need to know what’s expected of you.

Let’s shine some light on the expense compliance areas to focus on to make sure you keep the taxman at bay. 

What do HMRC expect from you?

If you have an HMRC compliance check, they’ll review your entire expense compliance process for non-compliance with HMRC expense regulations.  
 
Their primary focus is to make sure that you have:  
 
• A clear and enforced policy  
• Appropriate approval processes  
• Comprehensive documentation  
• Appropriate checks and controls  
• Full compliance with Tax and VAT requirements  
• A robust and secure payment process

The VAT rates in the UK

VAT (or Value Added Tax) is a tax added to the price of most goods and services in the UK.

If you’re a business owner, you’ll need to register for VAT if your taxable turnover exceeds £90,000 in a 12-month period. 

Once registered, you’ll charge VAT on your sales and reclaim the VAT you’ve paid on your purchases.  

Here are the VAT rates for 2024: 

	% of VAT	What the rate applies to
Standard rate	20	Most goods and services
Reduced rate	5	Some goods and services, e.g. children’s car seats and home energy
Zero rate	0	Zero-rated goods and services, e.g. most food and children’s clothes

 When you mustn’t charge VAT

There are certain goods and services that are exempt from VAT. This means you won’t charge VAT on these items — even if you’re VAT-registered.

Some examples of VAT-exempt items include:

• Financial services: banking, insurance, investments. 
• Healthcare and medical treatments: doctor’s visits, prescriptions. 
• Education and training: school fees, university tuition. 
• Charity services: charitable donations, fundraising events. 

You can also access HMRC’s full list of VAT exempt goods. 

Remember, even though you don’t charge VAT on these items, you still need to keep track of them in your business records. 

Expense compliance when it comes to vehicle mileage 

Did you know that your employees can claim back time spent traveling for work? 

That’s right, by following HMRC’s mileage rates, you can empower your employees to claim back vehicle expenses incurred for business purposes.

Here are the mileage allowance rates for 2024:

Type of vehicle	10,000 miles	10,000 + miles
Cars and vans	45p	25p
Motorcycles	24p	24p
Bikes	20p	20p

 What are HMRC’s advisory fuel rates?

HMRC’s advisory fuel rates apply to company-owned cars and serve two main purposes:

1. Reimbursing your employees for business travel expenses incurred in a company car.  
2. Managing reimbursements when your employees use a company car for personal travel and need to repay the business.  

Here are the advisory fuel rates for 2024:

Petrol

Engine size (cc)	Mean MPG	Fuel price (per litre)	Fuel price (per gallon)	Rate per mile	Advisory fuel rate
Up to 1400	51.0	143.4 pence	652.0 pence	12.8 pence	13 pence
1401 to 2000	42.3	143.4 pence	652.0 pence	15.4 pence	15 pence
Over 2000	27.1	143.4 pence	652.0 pence	24.1 pence	24 pence

Diesel

Engine size (cc)	Mean MPG	Fuel price (per litre)	Fuel price (per gallon)	Rate per mile	Advisory fuel rate
Up to 1600	56.9	149.1 pence	677.8 pence	11.9 pence	12 pence
1601 to 2000	49.3	149.1 pence	677.8 pence	13.8 pence	14 pence
Over 2000	38.0	149.1 pence	677.8 pence	17.8 pence	18 pence

 LPG (Liquefied Petroleum Gas) 

Engine size (cc)	Mean MPG	Fuel price (per litre)	Fuel price (per gallon)	Rate per mile	Advisory fuel rate
Up to 1400	40.8	98.3 pence	446.9 pence	10.9 pence	11 pence
1401 to 2000	33.8	98.3 pence	446.9 pence	13.2 pence	13 pence
Over 2000	21.7	98.3 pence	446.9 pence	20.6 pence	21 pence

 Electric

Electrical efficiency — miles per kilowatt-hour	Domestic electricity cost (per kilowatt-hour)	Rate per mile	Advisory electric rate
3.59	26.42 pence	7.36 pence	7 pence

 How to reclaim VAT on fuel

If you’re VAT-registered, you can often reclaim the VAT you’ve paid on fuel costs.

However, there are a few conditions:

• Business use: the fuel must be used for business purposes. This could be for company vehicles or employee reimbursements for business mileage.
• Accurate records: you’ll need to keep detailed records of your fuel purchases, including receipts and mileage logs. 

There are two ways you can reclaim VAT on fuel:

1. Reclaim all the VAT paid on fuel purchases and pay the appropriate fuel scale charge for your vehicle.  
2. Claim VAT only for the fuel used during business trips by maintaining thorough mileage records to demonstrate usage exclusively for business purposes.  

Expense compliance around carbon reporting

From July 2025, you’ll be required to provide more detailed information about your sustainability practices and climate related risks. 

This means if your business meets certain criteria, such as having a significant turnover (exceeding £500 million) and employee count (at least 500), you’ll be required to report on your carbon emissions.

You’ll need to:

• Track your carbon footprint: monitor your direct emissions (Scope 1) and indirect emissions from purchased energy (Scope 2).
• Assess your supply chain: evaluate the carbon footprint of your suppliers and consider ways to reduce emissions throughout your supply chain (Scope 3).
• Set reduction targets: establish clear targets for reducing your carbon emissions and develop a plan to achieve them. 

What you need to know about tax compliance 

When it comes to tax compliance, we know the number one question on your mind: are reimbursed expenses taxable in the UK? 
 
The short answer is no. If expenses are wholly, exclusively, and necessarily incurred in the performance of your job, they aren’t taxable. 
 
For example, if you’re a salesperson and your job requires you to travel to meet with clients. Any expenses you incur, such as travel costs, accommodation, and meal expenses, can usually be reimbursed tax-free. 

Are there any exceptions? 

Yes, if the expenses aren’t classed as “work-related”, or if they’re seen as providing a personal benefit. 
 
Here are a couple of examples:   

• Excessive or extravagant expenses: if your expenses are deemed unreasonable or excessive, they may be considered taxable income.  
• Personal expenses: reimbursements for personal expenses, such as commuting to and from work, are generally taxable. 

We know it can be tricky, but knowing the difference between deductible and non-deductible expenses can significantly impact your financial planning and tax liability.  

What you need to know about corporation tax

If you’re setting up a limited company in the UK, you’ll need to register for corporation tax within three months of starting your business.

This tax is applied to your company’s profits, investments, and any gains from selling assets.

Here’s a breakdown of the 2024 rates:

• Small profits rate (companies with profits under £50,000): 19%
• Main rate (companies with profits over £250,000): 25%

What you need to know about National Insurance Contributions   

National Insurance Contributions (NICs) are essentially taxes on earnings that help fund state benefits like the NHS and State Pension.  
 
If you’re a business owner in the UK, you’ll need to understand the different types of NICs and how they apply to your business:

Class 1 NICs

• Employee NICs: deducted from your employees’ wages. 
• Employer NICs: paid by you, on top of your employees’ wages.

Class 1A NICs

Class 1A NICs are a type of tax that you pay on certain benefits you provide to your employees.

These benefits, often called “Benefits in Kind (BIK)” can include things like:   

• Company cars: if you provide your employees with company cars, you’ll need to pay Class 1A NICs on the benefit value of the car.  
• Private healthcare: if you offer private health insurance to your employees, you’ll also need to pay Class 1A NICs on the cost of the insurance.  
• Accommodation: if you provide accommodation for your employees, such as a company flat or house, you’ll need to pay Class 1A NICs on the benefit value of the accommodation. 

Why you need to create an expense policy 

A company expense policy is like a roadmap to expense compliance. It outlines what expenses are reimbursable, how much you can claim, and what documentation you need to provide (for your company or HMRC).

By having a clear and concise policy in place, you can make sure that your employees understand the rules and submit accurate expense claims. 

To help you get started you can download our free expense policy template. 

How to report your expense reimbursements to HMRC

You have a couple of options to choose from when reporting the reimbursement of expenses: 

• You can use a P11D form to report your expenses and benefits to HMRC at the end of the tax year. 
• You can opt for payrolling, where you include the value of the expenses and benefits in the employee’s pay.  

It’s worth noting that starting from April 2026, all BIKs that you provide (except for loans and living accommodation) will have to be reported and taxed through payroll.

Your 6-step guide to HMRC expense compliance

1. Understand the rules

• Familiarise yourself with HMRC’s guidelines on allowable expenses. 
• Stay updated: keep an eye on any changes to tax laws and regulations.

2. Keep detailed records

• Keep all receipts for expenses — no matter how small. 
• Maintain a mileage log: if you use your car for business, keep a detailed record of your mileage. 
• Document the business purpose: explain why each expense was necessary for your job.

3. Categorise your expenses

• Clearly distinguish between expenses incurred for business purposes and those for personal use. 
• Use appropriate expense categories (e.g., travel, accommodation, meals, office supplies).

4. Claim the right amount

• Make sure that your expense claims are in line with HMRC’s rules and regulations. 
• Only claim for reasonable and necessary expenses.

5. Submit your claims on time

• Follow your company’s specific procedures for submitting expense claims. 
• Don’t delay in submitting your claims to avoid potential issues. 

6. Choose an expense management system that fully complies with HMRC

A sophisticated expense management system like Capture Expense will help you automate the process, reduce errors, and comply with HMRC regulations.  

You need to Look for a system that can: 

• Automatically calculate mileage claims based on HMRC rates 
• Generate accurate expense reports 
• Integrate with your accounting software 
• Provide real-time insights into your spending habits 
• Offer robust audit trails for expense compliance purposes 

Do you still need help with expense compliance?

Book a personalised demo today and we’ll help you with all your expense compliance needs. There’s not a mileage query we can’t handle, or a tax problem we can’t solve.