Travel expenses for self employed

Posted on Posted in Self Employed

In this post, I have summarised all the travel related expenses that you will incur while running your self employed business. Being a sole trader you are always on the run. You may use different modes of transport. You travel from one place to another. You spend a small fortune on travelling. Sole trader clients always ask me one question.

What can I claim as a travel expense?

Unfortunately, the tax laws are not very clear on this subject. Because this is open for abuse, HMRC will decide the allowability of travel on case by case basis. However, there are certain guidelines given by HMRC which you can use to decide if your travel falls under that criteria?

Let’s discuss all the possible scenarios.

Home to work travel

HMRC is very clear on this matter. Home to work travel DOES NOT count as business travel. So, it becomes important to establish the place where your work (business) is based. Like many other self employed people, you might be working from home. Or you may have some separate business premises. In some circumstances, you may have more than one business place.

If you have no fixed place of work, the cost of all travel is tax deductible. For example, if you are a self employed sub-contractor working on different jobs at different days, you will be travelling to these jobs from your home. Some day, you may travel from one site to another. This is also allowable.

Where the cost of your travel is tax deductible, the cost of subsistence can be deductible as well under certain circumstances.

Overnight accommodation

If you can demonstrate that it is not possible or reasonable to make a return journey home on the same day from your work, overnight accommodation can be claimed as business expense. While you are staying overnight in a hotel away from home, you can claim a reasonable amount in food and drink.

This trip must be for the purpose of your business

Such trips must be occasional and not part of a normal pattern

What if you have to work on a project away from home and the project runs over a couple of month.

Sometimes as a sole trader, you pick up a project away from home. In that case, you will need an overnight accommodation away from your home for the entire duration of your project. Let’s say you rent an apartment while you are working on this project for two months. Yes, as a self employed you can claim the rent paid and all ancillary costs in relation to your living as business expense. The accommodation should be reasonable. If you rent a one bedroom apartment, you will be able to claim it without much problem. But, if you rent a 5 bedroom house so that your family can visit, HMRC can disallow some part of your rent paid for such accommodation. You can deduct such travel expenses on your self assessment tax return.

Use of a car

Being a sole trader, you may use a car to travel. The car can be used as for your business. It can be used for private purpose as well. So, the cost must be apportioned between business use and personal use. Generally, this split can be done by measuring the mileage.

Let’s take an example:

You have a car that you use for business during the weekdays and for personal use over the weekends. You estimate that on an average weekend, you travel 20 miles while doing grocery and other tasks. In a year there are around 10 weekends where you go visit your friends and families. On an average, you travel 200 miles for such visits. During the year, you take your car for a vacation trip and on that trip you travel for around 750 miles. And during Christmas, you visit your family for which you travel 350 miles round trip.

Grocery Run – 20 x 52 = 1,040

Visit family and friends – 10 x 200 = 2,000

Vacation – 750

Christmas – 350

Total miles – 4,140

So, you have worked out that you travel around 4,140 miles for personal purpose. Let’s assume that during the year  you travelled for 15,000 miles. So, the split becomes easy.

Total miles – 15,000

Less: Personal miles – 4,140

Business miles – 10,860

This gives a ratio of 71% and 29%. Let’s say your keep it as 70:30 for business to personal.

Now, you spend following on your car.

Road Tax – £130

Insurance – £550

Breakdown cover – £270

Servicing, up-keeping and repairs – £800

Car loan interest – £500

Fuel – £1,800

Total – £4,050

Applying the above formula, you can claim (£4,050 x 70%) – £2,835 as tax deductible expense.

The cost for parking, tolls and other expenses can be directly identifiable as business expenses so, you won’t have to calculate such split. 

Capital Allowance on the Car:

You can use capital allowance to claim the value of your car for tax deduction purpose. It is a complex subject and you can find more about that by reading my other blog post >>> here.

If you are a sole-trader and if you have any question about business travel for your self employed business, please get in touch.