Travel and accommodation expenses: What self-employed business owners can claim
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Posted: Tue 4th Jul 2023
Are you a self-employed business owner wondering how to make the most of your deductions? Do you often find yourself perplexed by which travel and accommodation expenses you can claim on your taxes?
Many self-employed people miss out on valuable deductions related to travel and accommodation, simply because they aren't aware of what qualifies as a legitimate business expense.
Understanding what you can claim is crucial in making sure you don't leave money on the table come tax season. By keeping meticulous records and recognising which expenses are deductible, you can significantly reduce your tax liability and keep more of your hard-earned money in your pocket.
Ready to take control of your finances? Read on, as we explore the ins and outs of travel and accommodation expenses that you, as a self-employed business owner or sole trader, are entitled to claim.
Understanding business travel and accommodation expenses
What are business travel expenses?
Business travel expenses include any costs you run up when traveling for work-related purposes, such as visiting clients, attending meetings or delivering goods and services.
These expenses must be "wholly and exclusively" for business purposes to be eligible for tax deductions.
What are accommodation expenses?
Accommodation expenses cover costs for overnight stays that are necessary for business travel. This includes hotels, Airbnb rentals or other temporary lodging needed for work purposes. Personal costs or luxury upgrades are not eligible.
Claiming travel and accommodation expenses
Reason for the journey
Before you can make an expense claim for travel or accommodation, you must consider why you made the journey in the first place.
Was it just for business – such as to visit a client, or to pick up your new business cards?
Or was part of the journey personal travel? For example, did you stop on your way home from a client meeting to do your weekly shop or another non-work-related chore?
If it was mixed (i.e. for both business and personal reasons), you need to look at whether you can split the business element from the private travel. Let's look at some examples.
Business journey: Incidental private use
If your journey was primarily for business, and any private use of the journey was incidental, you can put the full costs of travel into your business accounts.
Example
Simon is a web designer. He travels by train from his home in Birmingham to visit a client in Brighton. While he's there, he has a walk by the sea.
The purpose of Simon's journey to Brighton was for business. The private element, his walk by the sea, was purely incidental. Consequently, Simon claims the full cost of his train ticket in his accounts.
Mixed journey: Different uses separable
If your journey included both business and private elements, but you can split out the private element, you would include only the business cost in your accounts.
Example
Jessica is a business consultant. She lives in Glasgow but has several clients in Manchester. She travels to Manchester and stays there for two nights so she can attend meetings with her clients.
She then decides to extend her stay to three nights so she can go to a football match. Doing this costs her one night's extra hotel bill and £50 in fees to change her train ticket.
The purpose of Jessica's journey was to visit clients. She can claim the full cost of her train ticket but she can't claim the £50 in fees to change the ticket. This is because she only had to do that in order to attend the football match, which isn't a business expense.
She can also only claim two nights' worth of overnight accommodation, not three, because the third night's stay was for a personal purpose.
Mixed journey: No separation possible
If your journey is for mixed purposes, and you can't split out the business and personal elements, you can't claim any of the cost of that journey.
Example
Tom runs a microbrewery. He travels to his local town to bank his business takings and to do the weekly supermarket shop for his family.
Because that journey was for mixed purposes, and because he can't split the cost into business and private, Tom must not include any costs for this journey in his business's accounts.
Using your personal vehicle
When you're self-employed, you'll often travel in your own car on business. The simpler way to do this is to include your business mileage in your accounts, at HMRC's approved rates.
Otherwise, you'll need to work out your fuel costs and claim a percentage of them in your accounts, based on how much you used your car for business and how much was private.
This means you have to track your vehicle mileage for all your journeys, so you can work out the business use percentage of your car. This second method will take longer but may save you tax if you have a car that's comparatively expensive to run.
Method of transport
HMRC don't require you to use the cheapest available method of transport – or even to claim only the amount that the cheapest method would have cost you. You can claim the full amount you spent on the journey. Let's look at an example.
Example
Elizabeth is a self-employed PR consultant working in London. She travels to Edinburgh to visit a client. To make this journey by overnight coach would cost her £35, to go by train would be £90 standard class or £160 first class, and to fly would cost her £80.
Elizabeth decides to save time and fly. She can claim the full £80. She's not restricted to claiming only £35 because there would have been a cheaper way she could have reached Edinburgh. The main issue with travel and accommodation is to make sure you're certain that the only costs you're including in your accounts are for business travel.
Remember – if you're in any doubt about what you can and can't claim, seek professional advice from an accountant. They will be able to advise you.
Accommodation for business
Accommodation expenses must be reasonable and directly related to business needs.
Allowable costs include hotel expenses or Airbnb stays for work-related overnight trips, or meal expenses included in the accommodation bill (provided they are reasonable costs).
Excluded costs include extra nights for personal leisure, and any luxury upgrades or room service not necessary for business reasons.
Example
David, a software developer, stays in a hotel during a three-day business trip. He claims the cost of his accommodation business travel and included meals. However, he can't claim the additional cost of upgrading to a suite for personal comfort.
Setting up a business expense policy
Creating a policy that clearly lays out your expense process gives you consistency and makes it easier for you and your staff to manage their expenses. Include the following in your policy:
Definitions of what accommodation expenses and travel costs are allowed.
Guidelines for documenting and submitting claims (for example, the need for receipts and/or invoices).
Rules for distinguishing between personal and business expenses.
Tips for managing and claiming travel and accommodation expenses
Keep detailed records: Retain receipts, invoices and a log of travel-related activities. HMRC will need proof for all your claims.
Use technology: Accounting tools like Sage, QuickBooks and Xero can help you track travel and accommodation expenses and submit claims quickly and easily.
Separate personal and business costs: Maintain clear distinctions between the two, as this will lessen the chances of your claims being rejected (or you being penalised!).
Consult a professional: If there's anything you're not sure about, consult an accountant or financial adviser. They can help you identify your actual expenses and follow HMRC's guidelines to the letter.
Key takeaways
Understanding and managing travel and accommodation costs is a vital aspect of running a small business. Whether it's claiming travel expenses for a client meeting or covering hotel expenses during a work trip, keeping to HMRC's guidelines ensures your claims are accurate and legitimate.
For more information on allowable business expenses, visit HMRC's guide to self-employed expenses.
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