Knowing what and how to claim business travel when you’re self employed is a confusing area. It is confusing because HMRC sets out rules which must be followed when deciding which you can use to reduce your tax bill.
To help clarify, here is my guide to what you can and can’t claim as business travel when you’re self employed.
HMRC & Allowable Business Travel When You’re Self Employed
Whilst HMRC rules can be frustrating. They are there (in part) to ensure fairness. The overarching aim is to make sure that someone who is self employed is not able to claim for travel when someone who is employed cannot.
If you are trying to work out whether you can claim for business travel then there are some questions you need to answer:
Where is Your Base of Work?
The first question to answer is where is your business located? You may choose to work from home, rent an office or you base yourself at home but store equipment at a separate location. The rule is:
Travel from Home to Your Base of Work is NOT an Allowable Expense
If you work from home, obviously you will not have any business travel expenses associated with commuting.
However if you rent an office then you cannot claim the cost of commuting to your office.
Watch out: If you store tools or equipment at a location away from your home and travel to collect your equipment on the way to work, then travel from your home to that location is NOT allowable.
Travel Away from Your Base of Work
Once you have established where your base of work is the next question is “Can you Business Travel when you’re self employed to see your clients?”
Irregular Travel is Allowable
In general, irregular business travel when you’re self employed outside of your normal commute is tax allowable.
For example, an accountant who travels around London meeting different clients or a freelance hairdresser who offers client visits as well as having a home based salon.
Regular Travel is NOT Allowable
Where you have a regular contract with a customer or client, it is most likely that you cannot claim for business travel.
For example, a freelance content writer agrees to travel twice a week to a particular client to work from their offices on an ongoing basis. The freelancer would not be allowed to claim the travel in relation to this client.
Business Mileage When You’re Self Employed
If you use your car to travel to clients then this is an allowable expense. But the rules regarding your base of work still apply.
To claim business mileage you’ll need to record the number of round trip miles you drive from your base of work. Then you can claim an amount as set by HMRC. The HMRC Mileage Claim Allowance for 2018 is 45p for the first 10,000 miles of driving and 25p thereafter.
If you travel away for business and stay overnight then you can claim for the:
- The cost of your travel to the location;
- Accommodation for your overnight stay;
- A Reasonable amount for an evening meal and breakfast;
- You can claim for an alcoholic drink with you meal (just keep it reasonable like a glass of wine or a beer);
Business travel when you’re self employed may involved buying food.
When you travel around meeting clients, food can end up costing you more than it normally would. So if you work from home, but spend a day meeting clients, lunch would naturally cost you more than grabbing something from your fridge.
Food you pay for outside of your normal work pattern are an allowable expense. Again though keep it reasonable – a meal deal from Pret would be acceptable but cocktails and lobster may not sit well with HMRC.
Overseas Business Travel
The barriers to working with different countries have never been so low. The costs of doing so can be an allowable expense but there are some HMRC rules you should keep in mind.
Don’t Mix Business with Pleasure
HMRC forbids a dual purpose trip. A dual purpose trip is one where you sight see or take your family along.
Dual purpose trips are NOT tax allowable
Overseas business travel is an opportunity to see places you never would have seen before with your partner or family. But think before you book otherwise you could find yourself paying for your own business trip!
The trick is to be smart about how you book your trip. You could keep entirely separate receipts and expenses for the business side of your trip and book your family’s ticket separate to your own. That way if the Tax Man does investigate your expense claim they wouldn’t be able to see that you took your family with you.
If travel abroad and loose your receipts for your hotel, food and taxi travel. Or you were unable to get receipts, then HMRC has set out guidelines where you can claim a set amount in respect of business travel in different countries around the world. You can find the approved business travel rates on the HMRC website here.
Record Keeping for Business Travel When You’re Self Employed
You need to keep all the receipts associated with business travel when you’re self employed. That brings TWO downsides:
- Keeping hold of all the receipts!
- Doing your expenses!
There are two ways to handle your receipts for business travel when you are self employed – with a manual expense claim form or on the move with an expense tracking app.
Expense Claim Forms for Business Travel When You’re Self Employed
You can choose to set up a spreadsheet to record your business travel and then keep your receipts to support your claim. HMRC accept now accepts scanned copies of receipts so there’s no need to keep hard copies.
Once you have documented your business travel you can:
- Claim the money back out of your business bank account;
- Claim the amount against your taxes when you file your self assessment tax return form.
Here are excel templates you can download and use to claim for your business travel:
Claiming Business Travel with an Expense Tracker App
Apps have simplified expense tracking by taking away the hassle of having to fill out spreadsheets and have a pocketful of receipts.
The best ones offer you the ability to log your expenses as well as photograph and upload copies of your receipts on the spot.
I use Freeagent for all my bookkeeping and expense tracking. It has taken the pain away from claiming my expenses – not to mention the time it saves.
Here’s how I use Freeagent to track my expenses and make sure I claim everything I possibly can against my tax bill!
Read my in depth review of Freeagent HERE and how I use it to manage my business finances.
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