Resources

From 6 April 2026, HMRC reshaped how employee expenses and workplace benefits are taxed, and the impact touches almost every UK employer. Some of the changes are genuinely good news. Others mean your teams could see a drop in take-home pay unless you act. Either way, you need to know what’s happening to taxable employee expenses and what to do about it. 

What’s actually changing for taxable employee expenses? 

The 2026/27 tax year brings two headline shifts that will affect how you handle employee expense reimbursements and benefits. 

Reimbursing homeworking equipment is now tax-free 

Here’s something that’s caught employers out for years. If you bought a desk for your home-working employee directly, it was a tax-free benefit under Section 316 ITEPA 2003. But if your employee bought that same desk themselves and you reimbursed them, that exemption didn’t apply, and the reimbursement became taxable. 

From 6 April 2026, that specific inconsistency is fixed. A new exemption (Section 316ZA) makes it tax-free for employers to reimburse employees directly for three categories of expense: 

• Homeworking equipment (desks, monitors, office chairs) 
• Eye tests and corrective glasses for display screen equipment users 
• Seasonal flu vaccinations 

This is a practical improvement for organisations with hybrid or remote teams. You no longer need to act as a purchasing agent, buying equipment directly and owning it, just to avoid a tax charge. You can now reimburse your employee, and the outcome is the same. 

It’s worth being clear about what this doesn’t change. Employers have been able to reimburse running costs (things like broadband or utility bills) tax-free under Section 316A since 2003, and that continues unchanged. The new 2026 exemption is specifically about these three categories of reimbursement, not a broad expansion covering all work-related costs. 

The £6-per-week homeworking relief is being abolished 

Here’s the less welcome news. HMRC is scrapping the £6-per-week flat-rate homeworking tax relief that employees could claim directly through their PAYE tax code or Self-Assessment returns. 

From April 2026, employees can no longer claim this themselves. If they want financial support for working from home, it can only come through employer reimbursement and only where the employer chooses to offer it. 

For employees who’ve been quietly benefiting from this relief, it could mean a noticeable drop in take-home pay—around £62 a year for basic-rate taxpayers, or £124 for higher-rate taxpayers. 

Do you currently know which of your employees has been claiming it? It’s worth finding out, since some may expect you to fill the gap and proactive communication will go a long way either way.

Which expense reimbursements are now tax-free? 

To make things clearer, here’s a breakdown of what’s changing to taxable employee expenses for specific benefit categories: 

Benefit category	Rule before April 2026	New rule (From 6 April 2026)
Homeworking equipment (desks, monitors, office chairs)	Taxable if reimbursed by employer. Tax-free only if bought directly by employer.	Tax-free to reimburse the employee, provided the equipment is strictly for work.
Eye tests & glasses (for display screen equipment users)	Taxable if reimbursed. Tax-free only if employer pays the optician directly.	Tax-free to reimburse the employee for the test and corrective appliances needed for work.
Flu vaccinations	Taxable if reimbursed. Employers had to rely on trivial benefit rules or pay directly.	Tax-free to reimburse employees who pay for their own seasonal flu jabs.

This is good news, but it does mean your internal expense processes will need updating. Claims for eye tests, flu jabs, and homeworking equipment will now come through as reimbursements rather than direct purchases, and your finance team needs to be ready to handle them correctly. 

The reimbursement rule that hasn’t changed 

It’s worth remembering that HMRC’s underlying test for allowable expenses remains the same. For a reimbursement to qualify as tax-free, the expense must be incurred wholly, exclusively, and necessarily for employment duties. 

So, while reimbursing your employee for a desk is now cleaner from a tax perspective, reimbursing them for a coffee machine—even if they use it while working from home—still won’t pass that test. Much to the sadness of many caffeine-fuelled workers, the equipment must be strictly for work. 

Who’s going to feel this most? 

The 2026 changes will touch almost every modern business, but some teams are more affected than others. 

• Employers with hybrid or remote teams: You’ll need to update your expense policy to reflect the new homeworking equipment reimbursement rules. The good news is that this is now far simpler; you can reimburse without worrying about the tax implications. 
• Employees who work from home: If they’ve been claiming the £6 weekly homeworking relief via Self-Assessment, they’ll lose that from April 2026. Unless you introduce an employer-funded allowance to replace it, they’ll notice the difference in their pay. 
• Payroll and HR departments: The influx of newly tax-free receipts will need to be handled through your internal expense claims process. If that process is still manual, now’s a very good time to review how you manage expense reimbursements. 

Areas to keep an eye on 

Even with the best intentions, many organisations will stumble over the details here. Here are the pitfalls surrounding taxable employee expenses that are most likely to catch people out: 

• Not updating your expense policy in time: The rules changed on 6 April 2026. If your expense policy still reflects the old approach, where direct employer purchases were tax-free, but reimbursements weren’t, you could either miss out on valid tax-free reimbursements or process them incorrectly. 
• Forgetting about your employees’ lost relief: If your staff have been claiming the £6/week homeworking relief independently, many won’t know it’s been applied until they see their pay. Communicating this proactively (and considering whether to offer an employer allowance) will go a long way. 
• Assuming all homeworking equipment reimbursements qualify: The “wholly, exclusively, and necessarily” test still applies. A monitor is clearly for work; a kitchen table that doubles as a dining surface isn’t. Make sure your expense compliance approach reflects this nuance. 
• Not reviewing your record-keeping approach: More tax-free reimbursements mean more receipts to process and store. HMRC requires proper documentation for all expense claims, and that’s not changing. Good HMRC record-keeping has always mattered; it matters even more as your reimbursement volumes increase. 

Ready to handle the 2026 changes with less effort? 

A lot of what’s changing in April 2026 comes down to one thing: more taxable (and untaxable) employee expense reimbursements going through your business. Eye tests. Flu jabs. Homeworking equipment. Possibly a new employer’s homeworking allowance. That’s a meaningful increase in the number of claims to process, approve, and record accurately. 

If your current process is built on spreadsheets and email approvals, that increase will be felt. Capture Expense helps finance teams handle exactly this kind of complexity. With receipt scanning that captures the data automatically, spend controls that keep claims within policy, and reimbursement workflows that integrate directly with your payroll and accounting systems, we have all you need to manage every aspect of expenses. 

If you pay employees for business miles driven in their own vehicles, a big change has just come into force—and it affects every mileage claim from April 2026 onwards.  

For the first time since 2011, HMRC has increased the Approved Mileage Allowance Payment (AMAP) rate. Cars and vans now attract a rate of 55p per mile for the first 10,000 business miles in a tax year, up from 45p. That’s a 22% increase, and it marks the end of a 15-year freeze that left many employees significantly out of pocket as fuel costs rose around them.  

This is genuinely good news for people who use their own vehicles for work. But for employers, it also means that expense policies need updating, payroll processes may need reviewing, and mileage calculations that have run on autopilot for years now need reconfiguring.  

Here’s everything you need to know about the HMRC mileage rate increase!  

What’s changed, and when did it take effect?  

The new AMAP rates from April 2026  

The change applies from 6 April 2026 (the start of the 2026–27 tax year) and has been backdated to that date. HMRC has published the updated rates officially on GOV.UK and they are:  

Vehicle type	First 10,000 business miles	Each mile over 10,000
Cars and vans	55p (was 45p)	25p (unchanged)
Motorcycles	24p (unchanged)	24p (unchanged)
Bicycles	20p (unchanged)	20p (unchanged)

The rate above 10,000 miles—25p per mile for cars and vans—remains the same. Motorcycle and bicycle rates haven’t changed either. So, this update is squarely focused on car and van users for the portion of miles below the 10,000-mile threshold.  

It’s also worth noting that the passenger payment rate (5p per passenger per business mile) hasn’t been updated, so it remains unchanged.  

Why now, after 15 years?  

The 45p rate was set back in 2011. Since then, fuel costs, vehicle running costs, and inflation have all increased considerably—leaving employees who use their own cars for work effectively subsidising the cost themselves. Many employers have responded by paying above the AMAP rate (which is fine, though the excess becomes taxable), but plenty of others have simply paid the HMRC rate without reviewing whether it was still fair.  

The increase to 55p brings the rate more in line with real-world running costs, reflecting ongoing pressure from business groups and payroll professionals who’ve been calling for a review for several years.  

What does the HMRC mileage rate increase mean for your organisation?  

Updating your expense policy  

If your business reimburses employees at the AMAP rate—or references HMRC’s approved rate in your expense policy—you’ll need to update your documentation to reflect the new 55p figure. This applies whether you’re running a small team or managing mileage claims across hundreds of employees.  

A few questions worth asking right now:  

• Does your current expense policy reference a specific mileage rate? If so, it needs updating.  
• Do you pay above or below the HMRC rate? If you pay below, you may now be under-reimbursing employees (which is a tax issue—more on that below).  
• Do your employees know the rate has changed? Clear communication is especially important for people who submit regular mileage claims.  

Tax and National Insurance implications  

The AMAP rate is the maximum you can pay employees for business mileage in their own vehicles without triggering a tax liability. As long as you pay at or below that rate, neither the employer nor the employee has a tax or National Insurance (NI) liability on those payments.  

Pay above it, and the excess is subject to tax and NI. Pay below it, and employees can claim Mileage Allowance Relief (MAR) for the difference via their Self Assessment return—but that’s an admin burden you can avoid by simply reimbursing at the correct rate.  

Now that the rate has moved to 55p, any reimbursements you’ve been making since 6 April 2026 at the old 45p rate are technically under-reimbursements. Employees have been driving at a loss. You’ll want to review whether any back-payments are needed.  

Make the HMRC mileage rate increase work for you  

The increase to 55p is long overdue, and it’s a positive change for employees who’ve been bearing the rising cost of vehicles. For employers, it’s a prompt—not just to update a figure in a spreadsheet, but to take a proper look at how mileage claims are managed end to end.  

The good news is that getting this right doesn’t have to be complicated. Update your policy, check for any backdated claims since April, communicate the change to your team, and make sure your systems reflect the new rate. It’s as simple as that.

If you’d like to see how Capture Expense automatically handles mileage tracking, rate management, and compliance, book a demo with a member of our team or take a product tour at your own pace! 

 

Business travel has its upsides: getting out of the office, meeting clients face to face, maybe even a halfway decent hotel breakfast. But when the trip’s over, the expense admin that follows? Not quite so appealing. 

That’s where per diems come in. Rather than asking employees to track every coffee, sandwich, and taxi ride with a receipt, a per diem system gives people a set daily allowance to cover those costs. It’s simpler, more predictable, and—when it’s set up correctly—much easier for everyone to manage. 

Whether you’re updating your company expense policy, making sure you’re HMRC compliant, or an employee who just wants to understand what they’re entitled to, this guide has you covered. 

We’ll walk through what per diem actually means, the UK rates for 2026/27, what you can and can’t claim, and how to handle it all without it becoming a headache. 

 

What does per diem mean? 

A per diem is a fixed daily allowance paid to employees to cover the cost of meals (and sometimes other incidental expenses) while they’re travelling for work. 

Rather than reimbursing each individual expense, a £3.80 coffee here or a £9.50 lunch there, the per diem system pays a flat daily rate. Employees don’t always need to provide receipts for each item (though they do need to show the meal happened during the trip), and employers don’t have to spend hours cross-checking itemised claims. 

It’s worth noting that per diem is sometimes used more broadly to refer to any form of daily subsistence allowance, including accommodation. In the UK, though, it most commonly refers specifically to meal allowances based on journey duration—as set by HM Revenue & Customs (HMRC). 

To make things clearer, here’s the key difference: 

• Per diem: a fixed flat rate, paid regardless of exact spend (up to the HMRC-approved limit), covering meals during qualifying business travel. 
• Expense reimbursement: the employee is paid back the actual amount they spent, supported by receipts. 

 

What are the UK per diem rates for 2026/27? 

HMRC sets benchmark scale rates for meal allowances that can be paid to employees during qualifying business travel. These are the maximum tax-free amounts you can pay. If you pay more than the benchmark rate without agreeing a bespoke rate with HMRC, the excess becomes taxable. 

For 2026/27, the UK benchmark meal allowance rates remain as follows: 

Minimum journey time	Maximum allowance
One meal (5-hour journey)	£5
Two meals (10-hour journey)	£10
Late evening meal rate (working past 8pm)	£15
24-hour period	£25

A couple of things worth knowing here. HMRC doesn’t define rates by breakfast, lunch, or dinner—instead, the rates are based on how long you’ve been travelling and whether you’re working late into the evening. The 24-hour rate of £25 covers the full day, and it can be split across meals however is practical. 

It’s also worth knowing that benchmark scale rates are not mandatory. Organisations can choose to pay less, or can apply to HMRC for a bespoke rate that better reflects their employees’ actual costs. This works well when your teams regularly travel to locations where the benchmark rates don’t quite stretch far enough, but be aware that agreed bespoke rates do require a formal application and some evidence of typical spend. 

You can find the full HMRC guidance on benchmark scale rates on GOV.UK. 

 

When can employees claim a per diem allowance? 

The qualifying conditions 

Not every work-related meal qualifies. HMRC has specific conditions that must be met for a per diem meal allowance to be paid tax-free. The employee must: 

• Be travelling for work, either as part of their role or to a temporary workplace (not just their regular commute). 
• Be away from their normal place of work or home for more than 5 or 10 continuous hours (depending on which rate applies). 
• Have actually bought a meal or drink during the trip, after the qualifying journey started. 

If all three conditions are met, the per diem rate can be applied without the individual needing to provide a receipt for every item. That said, employees should keep some record that the meal took place during the business trip—a note of the time, location, and rough cost is good practice, even when receipts aren’t strictly required. 

When you can’t claim 

It’s equally important to know when the allowance doesn’t apply. You can’t claim a per diem meal allowance if: 

• No meal or drink was actually purchased. 
• The meal was provided for free. For example, as part of a training course, event, or conference. 
• The meal was eaten at home before leaving or after returning. 
• A meal was included with travel or accommodation (such as a train or flight). 
• The expense included alcohol (this isn’t covered under HMRC’s rules). 
• The journey was a regular commute to a permanent workplace. 

 

A per diem example 

Meet Jamie. He works for a civil engineering consultancy based in Leeds, and he’s heading down to Bristol for a two-day site visit. 

His company uses HMRC’s benchmark per diem rates for domestic travel. Rather than collecting every receipt, Jamie receives a daily meal allowance based on his journey duration. 

Day one: Jamie leaves home at 6:30am and doesn’t get back to his hotel until 9pm. He’s been travelling and working for well over 10 hours, and he finishes work past 8pm—so he qualifies for the £25 24-hour rate. He grabs breakfast at the train station, buys lunch near the site, and has dinner at a restaurant close to the hotel. He notes the times and locations, just in case HR needs confirmation that the meals happened during the working day. 

He doesn’t try to claim the glass of wine with dinner as he knows alcohol isn’t covered, and he doesn’t claim for the snacks he bought from the hotel minibar, which he knows aren’t part of the allowance. 

Day two: A shorter day. Jamie wraps up by 4pm and is back home by 7pm. His journey was around 5 hours including travel, so he qualifies for the one-meal rate of £5 for lunch. The train home and hotel were booked and paid centrally on the company card, so his per diem only needs to cover meals and incidentals. 

At the end of the trip, Jamie submits his per diem claim through Capture Expense. No envelope stuffed with crumpled receipts. No hunting through his bank statements. Just a quick submission that goes straight to his manager for approval. 

 

What happens if you go over the HMRC per diem rate? 

This is a question that comes up a lot, so it’s worth getting right. 

If an employee spends more than the benchmark rate (say, they spend £40 on a meal when the daily rate is £25), the employer has two options: 

• Reimburse only the HMRC rate: the company pays £25, and the employee covers the remaining £15 themselves. Clean, simple, and no tax implications. 
• Reimburse the full amount: this is fine, but only if the company has a formally agreed bespoke scale rate with HMRC. If they haven’t, the excess (£15 in this example) is treated as taxable income and is subject to income tax and National Insurance contributions (NICs). 

A lot of organisations don’t realise the second point until it shows up in a PAYE (Pay As You Earn) audit. If your teams regularly travel to high-cost areas like London, major airports, or even international destinations, it’s worth reviewing whether a bespoke rate agreement with HMRC might be a better fit than the benchmark rates. 

 

How to report per diem payments to HMRC 

How you report per diem payments depends on whether they’re within the HMRC benchmark rates or over them. 

Payments within HMRC benchmark rates 

If you’re paying at or below the benchmark rates, and the qualifying conditions are met, payments can be made tax-free and don’t need to be reported to HMRC. No P11D needed. No additional payroll reporting required. This is one of the main reasons the per diem model is so popular as it genuinely cuts down on reporting admin. 

There’s one caveat: from April 2019, HMRC removed the requirement for employers to check that employees have actually bought a meal. However, employees do still need to have bought a meal for the rate to apply—it’s just that employers are no longer expected to verify every claim. A good expense reporting process will still make sure there’s some basic evidence in place. 

Payments over HMRC benchmark rates 

If you’re reimbursing above the benchmark rates (without a formally agreed bespoke rate), the excess is taxable. In this case, you’ll need to: 

1. Report the excess amount on a P11D form for each affected employee at the end of the tax year. 
2. Complete a P11D(b) to summarise total expenses and calculate any Class 1A NICs due. 
3. Pay any Class 1A NICs owed by 22 July following the end of the tax year (or 19 July if paying by post). 

It’s also worth flagging an important change on the horizon. From April 2027, all benefits in kind—including taxable expense payments—will need to be reported and taxed directly through payroll, rather than via P11D forms. If you’re planning your expense processes now, it’s a good idea to make sure your payroll software and expense platform will be ready for that change. 

You can find the full guidance on reporting expenses and benefits on the HMRC website. 

 

Common per diem mistakes to avoid 

Even with a simple system, things can go wrong. Here are the most common pitfalls organisations run into with per diem allowances: 

• Paying the allowance without checking qualifying conditions: if the employee’s journey doesn’t meet the 5- or 10-hour threshold, the payment isn’t tax-free. Even if it’s within the benchmark rate. 
• Including alcohol in the claim: it’s an easy mistake, but alcohol isn’t covered under HMRC’s rules. Make sure your expense policy makes this clear. 
• Applying the same rate for all travel: domestic and international rates are different. Using UK rates for overseas trips could leave employees out of pocket—or leave the company overclaiming. 
• Not updating rates when HMRC revises them: HMRC doesn’t always make a big announcement when rates change. It’s worth reviewing your policy at least once a year. 
• Not having a written expense policy: without a clear company expense policy, employees don’t know the rules—and inconsistent claims become much harder to manage. 

 

Make per diem management simpler 

Managing per diem allowances doesn’t have to mean hours of admin, chasing receipts, or worrying whether your rates are still compliant. With the right tools in place, you can set your rates, automate approvals, and keep everything properly documented—without it taking over your week. 

Capture Expense makes it straightforward to manage travel and subsistence claims, including per diem allowances. Employees can submit claims on the go using the mobile app, managers get clear visibility over what’s being claimed, and your finance team can be confident that everything lines up with your expense policy and HMRC’s rules. 

If you’d like to see how it works in practice, you’re warmly invited to book a personalised demo. No pressure—just a chance to see whether it’s a good fit for your organisation. And if you want to go deeper on related topics, our guides on HMRC meal allowances and subsistence allowance in the UK are a good next step. 

A new tax year is here—and with it, a fresh set of rates, rules, and updates that affect how you handle expenses. While some are minor adjustments, others are more significant. Either way, now’s the time to make sure your expense policy, your reimbursement processes, and your system settings are all reflecting the right figures. 

For 2026/27, the key expense changes are: van benefit charge up to £4,170, car fuel multiplier up to £29,200, AMAP rates unchanged at 45p/25p, and mandatory BIK payrolling from April 2027.

Approved mileage allowance payments (AMAPs) have increased 

After 15 years frozen at 45p, HMRC has increased the approved mileage rate for cars and vans. Published on GOV.UK on 21 May 2026 and backdated to 6 April 2026, the new rate now applies:

Vehicle	First 10,000 business miles	Above 10,000 miles
Cars and vans	55p per mile (up from 45p)	25p per mile (unchanged)
Motorcycles	24p per mile (unchanged)	24p per mile
Bicycles	20p per mile (unchanged)	20p per mile

The passenger payment rate also stays at 5p per mile, per passenger.

This is the change most likely to need action right now. If you reimburse employees for business travel in their own vehicles, your expense system and policy should reflect the 55p rate—and because the increase is backdated to 6 April, you may want to consider a top-up for any mileage already reimbursed at 45p this tax year. Employees reimbursed below the approved rate can claim Mileage Allowance Relief on the shortfall.

Advisory fuel rates for company cars 

Advisory fuel rates (AFRs) apply to company cars; approved mileage allowance payments (AMAPs) apply to employees’ personal vehicles—they are different rates for different situations.

While AMAP rates are static, HMRC’s advisory fuel rates for company cars are reviewed every quarter—so these can change throughout the year. The rates effective from 1 March 2026 are: 

Petrol 

Engine size	Rate per mile	LPG rate per mile
Up to 1400cc	14p	11p
1401cc to 2000cc	17p	13p
Over 2000cc	26p	21p

Diesel 

Engine size	Rate per mile
Up to 1600cc	15p
1601cc to 2000cc	17p
Over 2000cc	23p

Electric 

Charging type	Rate per mile
Home charging	7p
Public charging	15p

For hybrid vehicles, HMRC treats them as either petrol or diesel—so apply the relevant rate based on the engine type. 

These advisory rates matter if your employees drive company cars and reclaim fuel costs. Reimbursing above the advisory rate creates a benefit in kind (BIK) liability unless the employee repays the excess. HMRC updates these rates on 1 March, 1 June, 1 September, and 1 December each year—so it’s worth bookmarking and checking them regularly. 

The only thing better than an all–expenses–paid business trip is an all–expenses–paid business trip overseas.  
 
The food, the hotels, the opportunity to explore—it’s all part of the experience. 
 
If you’re new to overseas subsistence allowance, or you’ve never heard of HMRC’s overseas subsistence rates, you’re in good hands.  
 
We’ll provide you with the rates for 2026, how to use them to reimburse your employees, and some real-world examples.

What is an overseas subsistence allowance?

Overseas subsistence allowance refers to a payment or reimbursement provided to employees who are required to travel and work outside their home country.  
 
This allowance is intended to cover their daily living expenses, such as meals, accommodation, and other incidentals, while they’re on assignment abroad.  
 
The amount typically depends on the location, duration of the stay, and the employer’s travel expense policy or government regulations. 

When can you claim overseas subsistence allowance? 

You can claim overseas subsistence allowance when you’re travelling outside the UK for work purposes and your employer (or company, if you’re the employer) is satisfied that the trip is directly related to your job duties.  

It applies when you’re on official business abroad, like attending meetings, conferences, or completing work-related tasks. 

Every company will have their own guidelines and reimbursement processes, but generally speaking, you can claim overseas subsistence allowance when:  

• Your employer approves the claim: meaning the trip must be pre-authorised by your employer (or company).
• You provide receipts or documentation: meaning you may need to show proof of expenses—such as hotel bills, or meal receipts—to support your claim and make sure it aligns with company policies. 

Are there any exceptions?

Yes, there are some expenses it doesn’t cover.  

The overseas subsistence allowance is specifically designed to cover your accommodation and daily living expenses while you’re in the foreign country. However, it doesn’t include incidental expenses you might have along the way.

For example:

• The cost of a taxi to the airport in the UK. 
• Snacks or drinks you buy at the airport before your flight.  

If you have these kinds of expenses, your employer (or company) may be able to reimburse you separately, but they’re not included in HMRC’s overseas subsistence rates.  

What are HMRC’s overseas subsistence rates? 

Here are HMRC’s overseas subsistence rates for some of the most popular destinations in 2026:  

Australia (Sydney)  

Subsistence type	Rate (AUD)
Over 5 hours	57.50
Over 10 hours	147.50
24-hour rate	195 plus room rate
Room rate	227
Breakfast	38
Lunch	51.50
Dinner	84.50
Other	0
Drinks	11.50
Hotel to office	9.50
Total residual	195

Canada (Montreal)

Subsistence type	Rate (CAD)
Over 5 hours	47
Over 10 hours	119
24-hour rate	156.50 plus room rate
Room rate	223.50
Breakfast	27.50
Lunch	42
Dinner	67
Other	0
Drinks	10
Hotel to office	10
Total residual	156.50

France (Paris)

Subsistence type	Rate (EUR)
Over 5 hours	40
Over 10 hours	86.50
24-hour rate	117 plus room rate
Room rate	199.50
Breakfast	24
Lunch	35.50
Dinner	42
Other	0
Drinks	9
Hotel to office	6.50
Total residual	117

Hong Kong 

Subsistence type	Rate (HKD)
Over 5 hours	292.50
Over 10 hours	761.50
24-hour rate	816.50 plus room rate
Room rate	2,376.50
Breakfast	0
Lunch	253
Dinner	429.50
Other	0
Drinks	79
Hotel to office	55
Total residual	816.50

Singapore

Subsistence type	Rate (SGD)
Over 5 hours	91.50
Over 10 hours	206.50
24-hour rate	218 plus room rate
Room rate	318
Breakfast	0
Lunch	79
Dinner	102.50
Other	0
Drinks	25
Hotel to office	11.50
Total residual	218

United Arab Emirates (Dubai) 

Subsistence type	Rate (AED)
Over 5 hours	161
Over 10 hours	432
24-hour rate	614.50 plus room rate
Room rate	949.50
Breakfast	127
Lunch	139.50
Dinner	250
Other	23.50
Drinks	42.50
Hotel to office	32
Total residual	614.50

United States of America (Los Angeles)

Subsistence type	Rate (USD)
Over 5 hours	28.50
Over 10 hours	72
24-hour rate	93 plus room rate
Room rate	193
Breakfast	12.50
Lunch	24.50
Dinner	40
Other	0
Drinks	7.50
Hotel to office	8.50
Total residual	93

How to use HMRC’s overseas subsistence rates 

When it comes to HMRC’s overseas subsistence rates, you have a couple of options for paying your employees: 

• You can pay the 24-hour rate for each complete period of 24 hours. This period starts when the employee arrives at their destination and ends when they leave. For example, if an employee arrives at the airport and starts their journey at 9am, they would be eligible for the 24-hour rate until 9am the next day, and so on.
• You can pay for the accommodation (room rate) along with individual meal rates and other incurred expenses. 

What if your employee is away for less than 24 hours?

You can still use HMRC’s overseas subsistence rates. You’ll just have to divide the period into smaller segments.  

For example, if the period includes an overnight stay, you can pay the room rate, plus the over-5-hour or over-10-hour rates—depending on how long the employee was away. 

Some real-world examples

Let’s look at a couple examples of how you can use HMRC’s overseas subsistence rates to reimburse your employees’ accommodation and subsistence expenses for travel outside the UK. 

Singapore  

One of your employees (let’s call him Matt) goes on a business trip to Singapore. He stays in a hotel for two nights, on a room only basis (i.e., no meals are included). 

Matt arrives in Singapore at 3pm on Monday and leaves on a 9am flight on Wednesday.  

You may reimburse Matt’s subsistence expenses as follows:  

Period and rates	Amount (SGD)
1 × 24-hour rate (3pm Monday to 3pm Tuesday)	218 plus room rate
10-hour rate (3pm Tuesday to 9am Wednesday)	206.50
Total	424.5

Paris

Someone from your sales team (Sarah), spends a day in Paris for an important meeting. She arrives in Paris at 9am and leaves at 8pm. 

Based on HMRC’s overseas subsistence rates, you can reimburse Sarah’s expenses at the Paris rate of €86.50 (as the trip lasted more than 10 hours). 

If Sarah had left Paris between 2pm and 7pm, your reimbursement would have been limited to the over 5-hour rate: €40. 

Want to keep all your travel expenses in one place? 

Whether you want to track your subsistence allowances in the UK or overseas, Capture Expense will keep everything organised, and in one platform.  

Book a demo today to see how easy it is to submit, track, and manage your expenses—saving you time and keeping you compliant with HMRC’s overseas subsistence rates. 

HMRC scrutiny isn’t getting lighter. And for many finance leaders, the real concern isn’t whether an enquiry will happen. It’s whether their processes would stand up to one.

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 2026: 

	% 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

Zero-rated vs exempt: what’s the difference?

Not all goods and services are treated the same for VAT.

• Zero-rated items are still taxable, but at 0%. You must record them on your VAT return and can usually reclaim VAT on related costs.
• Exempt items are not subject to VAT. You do not charge VAT, and you generally cannot reclaim VAT on costs related to these activities.

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 2026:

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 2026:

Petrol

Engine size (cc)	Mean MPG	Fuel price (per litre)	Fuel price (per gallon)	Rate per mile	Advisory fuel rate
Up to 1400	50.7	132.0 pence	600.1 pence	11.8 pence	12 pence
1401 to 2000	42.8	132.0 pence	600.1 pence	14.0 pence	14 pence
Over 2000	27.2	132.0 pence	600.1 pence	22.1 pence	22 pence

Diesel

Engine size (cc)	Mean MPG	Fuel price (per litre)	Fuel price (per gallon)	Rate per mile	Advisory fuel rate
Up to 1600	55.7	141.3 pence	642.2 pence	11.5 pence	12 pence
1601 to 2000	49.6	141.3 pence	642.2 pence	13.0 pence	13 pence
Over 2000	36.6	141.3 pence	642.2 pence	17.5 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	40.6	89.0 pence	404.6 pence	10.0 pence	10 pence
1401 to 2000	34.2	89.0 pence	404.6 pence	11.8 pence	12 pence
Over 2000	21.7	89.0 pence	404.6 pence	18.6 pence	19 pence

Electric

From 1 March 2026, the advisory electric rates for fully electric cars are:

• 7 pence per mile for home charging
• 15 pence per mile for public charging

Charging location	Electrical efficiency (miles per kWh)	Electricity cost (per kWh)	Rate per mile	Advisory electric rate
Home charger	3.59	26.10 pence	7.26 pence	7 pence
Public charger	3.59	54.00 pence	15.02 pence	15 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:

• Reclaim all the VAT paid on fuel purchases and pay the appropriate fuel scale charge for your vehicle.  
• 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

Business sustainability is a growing priority in 2026. From reducing carbon emissions to managing sustainable business spend, organisations are under increasing pressure to demonstrate measurable progress backed by reliable data.

In the UK, certain organisations are required to report their energy use and carbon emissions under Streamlined Energy and Carbon Reporting (SECR). This applies to quoted companies, as well as large unquoted companies and LLPs that meet at least two of the following criteria: 250 or more employees, £36 million or more in turnover, or an £18 million balance sheet total.

Where in scope, organisations are required to:

• Track their carbon footprint by reporting Scope 1 (direct emissions) and Scope 2 (purchased energy) emissions
• Disclose energy usage and include an intensity metric to measure performance over time
• Provide narrative on energy efficiency actions taken during the reporting period

Many organisations also go further by assessing Scope 3 emissions across their supply chain and setting reduction targets, particularly where ESG reporting is a priority.

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 taxIf 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 2026 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 2027, 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.