HMRC Travel and Expense Rules for UK Employers (2026-27)

HMRC doesn’t certify expense software. What it looks at is what your process can prove: the right rates for the date of the journey, a receipt against every claim, an audit trail nobody can quietly edit, VAT evidence that holds up, and records you can still produce years later. That’s what HMRC travel expenses guidelines come down to in practice.

These HMRC travel and expenses guidelines are for the person signing off the expense run, not just filling one in. Below, you’ll find what you can reimburse tax free, what you have to report, what you have to keep, and the two areas where the rules changed recently enough that a lot of processes haven’t caught up. 

What counts as business travel 

A journey counts as business travel if the employee travels in the performance of their duties, or to a place they must attend for their role that isn’t their permanent workplace. 

Ordinary commuting never counts in this. Home to a permanent workplace isn’t reimbursable tax free, however early the start or long the drive. Pay it anyway, and it becomes earnings, taxed through payroll. 

A temporary workplace becomes permanent once the employee has attended, or expects to attend, for more than 24 months and spends 40% or more of their working time there. Both these tests need to be met; if you miss one, the workplace will stay temporary. 

Here’s the part a lot of organisations don’t realise—it’s the expectation that matters, not just the elapsed time. Take a contractor told in month nine that the placement will run three years. They lose relief from month nine, not month 24. 

Mileage: what you do you pay and on what basis? 

Here are the Approved Mileage Allowance Payments (AMAP) rates for 2026-27: 

If you pay at or below those rates, nothing is reportable. Pay above them, however, and the excess counts as earnings for the employee and carries Class 1A. And, if you were to pay below them, the employee can claim Mileage Allowance Relief on the shortfall. 

Good news: the rules themselves are simple once you know them. The bit that trips people up is the passenger supplement—5p per passenger per mile, payable only where the passenger is on their own work journey too. It’s easy to miss, and it’s usually the first thing an audit picks up on. 

Why you need two mileage rates this year 

The car and van rate rose from 45p to 55p on 6 April 2026. It had sat at 45p since the 2011-12 tax year—fifteen consecutive years—so a 10p rise is a 22% increase against a base almost nobody had needed to touch for over a decade. 

That means the split-year problem is live right now. The rate applies by the date of the journey, not the date of the claim. A claim submitted in June 2026 for a journey made in March 2026 has to be paid at 45p. A system with one global rate field pays it at 55p, silently, and that 10p becomes a payment above the approved amount: taxable on the employee, reportable, and Class 1A bearing on you. 

Late claims, rejected claims resubmitted, and anyone catching up a quarter of driving in one go all land in this trap. Any system you rely on needs a rate table versioned by effective date, not a single figure someone remembers to update. 

The size of the change matters too. Forty field engineers averaging 12,000 business miles each moves the approved amount from £200,000 to £240,000 a year. That’s a budget line rather than a payroll detail, and it arrived without a rate card change on your side. 

One thing that hasn’t changed is VAT. Input tax on the fuel element of a mileage payment is still driven by the advisory fuel rates rather than the AMAP rate, so a higher AMAP recovers you nothing extra. 

Meals and subsistence 

HMRC’s subsistence rules are less about what you choose to reimburse and more about whether the payment matches a qualifying journey and genuine meal cost. 

Here are the HMRC benchmark scale rates for 2026-27: 

Two things decide whether the exemption holds. Benchmark rates haven’t needed a checking system since 6 April 2019. Bespoke rates, agreed with HMRC in advance, still do. 

The knowledge and suspicion test applies either way: pay a rate you know or suspect isn’t matched by actual spend, and the exemption falls away. 

Outside the UK, use the published country rates, taking the closest listed city where the country itself isn’t listed. 

Accommodation and when a reimbursement becomes reportable 

Accommodation on a qualifying journey is reimbursable at reasonable actual cost, receipted. Hotel VAT is only recoverable against a valid invoice, and above £250 that means a full VAT invoice rather than the folio summary emailed at checkout. 

Reimbursing a qualifying expense is exempt, so it doesn’t reach a P11D (the form used to report expenses and benefits) at all. What does reach one is everything outside the exemption: mileage above the approved amount, subsistence above the benchmark or bespoke rate, personal spend on a company card, and anything paid with no qualifying journey behind it. 

P11D and P11D(b) are due by 6 July, with Class 1A NICs due by 22 July at 15%. A PAYE Settlement Agreement can absorb minor and irregular items instead, and payrolling benefits in kind removes most of the P11D exercise—this becomes mandatory from April 2027. 

The two routes aren’t interchangeable. Reimburse, and the employee is made whole while you carry the compliance obligation. Don’t, and the employee claims tax relief themselves, recovering only tax at their marginal rate—20p in the pound on a mileage shortfall for a basic rate taxpayer. That gap is exactly why underpaying mileage tends to produce complaints rather than savings. 

Self-employed contractors sit outside all of this, deducting their own costs from trading profit. 

VAT recovery on employee expenses 

This is where most expense processes fall down, because the money is real and the paperwork is thin: 

• Input tax on a mileage allowance is the fuel element times the VAT fraction, based on mileage actually done. 
• Per employee, you need to hold five things: mileage travelled, whether it was business or private, the vehicle’s cylinder capacity, the rate of mileage allowance, and the input tax claimed. Miss one, and the claim is unsupported. 
• Keep fuel invoices covering at least the VAT you reclaim, unless the fuel was bought on a company fuel, credit or debit card. 
• Above £250 including VAT, you need a full VAT invoice—a simplified or retailer’s invoice is only good up to £250. 

One to watch: VAT on business entertainment of non-employees is blocked. Code it separately from staff entertaining, or it gets reclaimed by accident and shows up in a VAT inspection. 

Evidence, receipts and retention 

HMRC accepts digital copies, so scanning and binning the paper is fine—as long as the image is legible and kept for the full period. It will ask for proof, and it often asks years later, which is the part that catches people out. 

Here’s the thing: capturing a receipt at the point of spend is a compliance argument, not just a convenience one. A receipt photographed at the till is legible, dated and attached to the right claim. The same receipt found in a jacket at month end is faded, partial or gone—and what replaces it is a guess. 

The test that matters isn’t whether you have a retention policy on paper. It’s whether you can produce a named receipt image from four years ago within a working day.

Staff entertaining and trivial benefits 

The annual function exemption is £150 per head per tax year, and it’s an exemption rather than an allowance—a penny over, and the whole cost becomes taxable, not just the excess. 

Trivial benefits are exempt at £50 or less each, with a £300 annual cap for close company directors. Neither can be cash, a cash voucher, or a reward for work done — so keep that distinction clear in your policy.

The UK employer expense rule reference set 

Here are twenty-four testable requirements you can check against these HMRC travel expenses guidelines:

Apply the same style of test to any system on your shortlist, whoever built it: a rate table versioned by effective date, the receipt image retained for the full retention period rather than just the claim lifetime, an immutable audit trail after approval, enforced separation of claimant and approver, duplicate detection across claim lines, card feeds and mileage, UK data residency, Cyber Essentials Plus, and a listing on the Crown Commercial Service G-Cloud Digital Marketplace.

HMRC travel expenses guidelines covered with Capture Expense

Capture Expense records the vehicle and any passengers against a distance calculated between start and end points rather than typed in, holds fuel type and engine size on the vehicle record, and tracks cumulative mileage per person so the rate steps down at the threshold automatically, rather than when somebody notices. 

If you’d like to see how that works in practice, book a demo with a member of our team—we’re happy to walk you through it.