Travel costs for the self-employed

Kirsty Young Personal Tax, Tax

With rising fuel prices becoming an issue for many self-employed people, here’s our overview of the rules relating to business travel as a self-employed person and/or sole trader.

The rules can be pretty tricky, so we’ll give you a summary of the key points here. This includes looking at what a qualifying journey is, so you can figure out if the trips you are doing (or plan on doing) will be allowed as a tax deduction.

 

Business travel = an allowable expense (usually)

Firstly, let’s get the general principle out of the way:

The cost of business travel is generally an allowable expense for tax relief.

That is the simple bit! What qualifies as business travel depends on:

  • The way that you trade

and

  • Where your ‘base of operations’ is.

 

Subsistence = tax deductible (usually)

The additional costs of business travel, such as subsistence (food/drink) or accommodation incurred when travelling can qualify / can be tax deductible.

The rules also vary if you are a limited company; here we’re just discuss self-employment (sole trader) only.

 

What is a business journey?

Business travel includes journeys to and from:

  • Customers
  • Suppliers
  • A workplace

If your business operates from home, then it’s likely journeys from home to other places of work could be classed as business travel.

Whether your home is your operating base is usually the main point of concern when dealing with business travel. If HM Revenue & Customs believe your home is not your ‘base of operations’, they will look to disallow your travel from there to where you are going.

 

Is your home your base of operations?

Use our short checklist below to help you think about whether your home is a base of operations/workplace:

You need to consider a number of factors, including:

  • How much time do you spend working from home?
  • Is some of your income earned when you are physically working at home?
  • Where do you see your customers/deal with suppliers?
  • Where do you store your stock, tools, vehicles and equipment?
  • Are any staff located there?
  • Where do you do your admin or book-keeping? Where is your paperwork stored?
  • Where do you pay business rates?
  • Do you pay rent or hold a lease?

 

‘Regular and predictable’ journeys

In addition to the factors above, journeys that are ‘regular and predictable’ are open to challenge and likely disallowable.

The most recent big example of this concerned a self-employed doctor. He was disallowed his travel from home to two hospitals because they were regular and predictable. He was, however, allowed his travel from home to patients’ homes.

If you think about it, employed people are not allowed to claim tax relief on their everyday commute, so the logic follows here. Therefore, if you operate from an office or shop, you will not be allowed the travel to and from home. This is because the shop or office is really your ‘base of operations’, not your home).

Are you an ‘itinerant’ worker, i.e. you work all over the place, like a bricklayer attending different sites all the time? If so, you are usually allowed the journey from home to site/client/customer, and back home again.

 

Travel costs you can claim

Costs you can claim include:

  • General motor costs (fuel etc OR mileage allowances but not both – see our other blog)
  • Trains & bus fares
  • Tolls and parking

As mentioned before, it is possible to claim food and drink (aka Subsistence) on a qualifying journey. We will cover this in another blog.

 

What records shall I keep?

As regular readers will know, accurate records are crucial (and a bit of an obsession of mine!). You should keep:

  • A log of all business journeys (to/from/amount of miles)
  • Receipts for all expenses incurred.

Whether you claim mileage or motor costs in your accounts, both of the above are very important. As we always say: Keep. Good. Records.

 

I’m still confused about travel expenses

Ask your accountant or book a consultation with us to help you make the most of your travel costs allowances as a self-employed person.

We offer a paid 1 hour, 1-2-1 consultation so you can ask simple questions of an accountant. You don’t have to become a client, so it’s a great way for you to get the help, when you need it.