If you use your car for work-related travel, you probably already know you can claim a mileage deduction using HMRC’s approved mileage allowance payment rates (AMAP). But what about motorway tolls, hotel accommodation and other travel-related expenses not covered by the AMAP? Are these tax-deductible?
Here’s a look at HMRC’s rules on travel-related tax deductions, how to calculate them and how to claim them.
First things first, let’s go over what the mileage deduction does cover.
Basically, the mileage deduction only covers the cost of running and maintaining your vehicle. These expenses include:
Unfortunately, the mileage deduction doesn’t cover travel expenses unless connected with running or maintaining your vehicle in some way. Consequently, this means you’ll need to claim the cost of tolls and other travel-related charges separately.
The short answer is that yes, you can - but only if you’re travelling for business-related reasons.
HMRC considers a journey to be business-related in one of two scenarios:
Unfortunately, commuting doesn’t count as a business journey. So if you work in London four days a week then travel home to Dartford for the weekend, you won’t be able to claim the Dartford Crossing toll.
In addition, HMRC will no longer consider a workplace temporary if:
In either of these two cases, HMRC will consider the site to be your permanent place of work. As a result, any travel to and from your home will count as commuting, which means you won’t be able to claim the cost of any tolls.
You can deduct tolls from your tax return if:
Let’s say you work in payroll at an office in Warwick. Your employer sends you off to Birmingham for a conference.
Your journey takes you through the M6. Therefore you’ll have to pay a £5.90 toll on your way there and another £5.90 on your return, which totals £11.80.
Your employer reimburses you £5.
Since you drove to and from Birmingham for business purposes, you can claim tax back on the amount your employer hasn’t refunded, that is £6.80.
Your status as employed or self-employed will determine how to deduct motorway tolls. Typically, you’ll need to either fill in form P87 or complete a self-assessment tax return.
Step 1: Tot up all the business-related tolls you’ve paid during the tax year. Don’t forget to keep a record of your receipts. It’s also important to keep a mileage log as proof of your business journeys.
Step 2: If your employer has reimbursed part of your expenses, deduct that. So, if you’ve spent £100 on tolls and your employer compensates you £50, you can only claim the remaining £50.
Step 3: Add your total toll bill to any other allowable expenses (we’ll talk about these in a minute). If your total toll bill and the other costs you’ve incurred during the tax year are less than £2,500, complete a P87 form.
Step 4: If your total expenses are greater than £2,500, you’ll have to complete a self-assessment tax return.
You’ve spent £100 in tolls during the 2017/18 tax year. Your employer has reimbursed £50.
You also spent £200 on other work-related expenses. Your employer hasn’t reimbursed you for any of these expenses.
Hence, you can deduct £250 from your taxes.
Since the amount is less than £2,500 and you’re employed, you can claim using form P87.
The process for deducting tolls from your taxes when you’re self-employed is pretty much the same as the process when you’re employed. The only difference is that you can’t file a P87 form, but must claim via a self-assessment tax return (unless you do business as a limited liability company, in which case HMRC considers you an employee of your company).
So, to claim tax back on motorway tolls when you’re self-employed:
Step 1: Add up your toll bill (don’t forget to keep receipts and record your mileage)
Step 2: Deduct any tolls you paid on personal journeys
Step 3: Add the answer in Step 2 to any other allowable expenses and deduct the result from the total income you earned during the tax year. The result is your total taxable income
Step 4: Complete your self-assessment tax return and send it to HMRC by the 31 October (if by post) or by the 31 January (if you’re filing it online).
You’re a self-employed sole trader.
In 2017/18, you earned £22,000. You also racked up £100 in toll bills and spent a further £2,000 on other business-related expenses.
Thus, you can deduct £2,100 from your income. As a result, you’ll only pay tax on £19,900.
However, since you’re self-employed, you’ll need to complete a self-assessment tax return.
You can claim any other travel-related expenses as long as they satisfy one of two tests:
What this means – tolls aside – you can also deduct other travel expenses not included in your mileage deduction, as long as you’ve incurred them or a definite proportion of the charges ‘wholly and exclusively’ for business reasons.
These expenses include:
As a rule, you can’t deduct the cost of food and drink from your taxes. Separating the business proportion from the personal element of your meal is nearly impossible from the viewpoint of the HMRC.
That said, HMRC does accept that food and drink may cost more in a different city. Hence, you can claim the cost of food and drink if:
HMRC’s ‘wholly and exclusively’ rule isn’t limited to travel-related expenses. You can usually deduct any expenditures from your taxes if you can prove that: