How Do I Deduct Tolls and other Travel Expenses?

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.

Which expenses does the mileage deduction cover?

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:

• Fuel, servicing (including your annual MOT) and repairs
• Car insurance
• Vehicle Excise Duty (VED)
• Depreciation (your vehicle’s reduction in value over time due to wear and tear)

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.

Can I deduct the cost of motorway tolls from my taxes or not?

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:

• It’s part of your job. For example, you’re a lorry driver who’s delivering goods to Edinburgh from a warehouse in Essex.
• You have to be somewhere other than your usual place of work temporarily. One scenario is that you’re working from a client’s office in a different city for a few days. Another, perhaps, because you’re an architect from Birmingham attending a conference in London about the latest developments in energy-efficient construction techniques.

What doesn't count as a business drive?

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:

• You work at the same location for more than two years
• You regularly spend more than 40 percent of a given work week there

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.

Who can claim the cost of motorway tolls?

You can deduct tolls from your tax return if:

• You’re travelling for business-related reasons.
• You’re self-employed.
• You’re employed, but you’ve paid the toll and your employer hasn’t reimbursed you.
• Your employer only reimbursed part of your expenses. In this case, you can usually claim the part your employer hasn’t covered.

Claiming toll costs: Example

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.

How do I deduct tolls from my taxes?

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.

How do I deduct tolls from my taxes as an employee?

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.

Toll expense calculation: Example 1

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.

How do I deduct tolls from my taxes if I’m self-employed?

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).

Toll expense calculation: Example 2

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.

What other travel-related expenses can I claim on my taxes?

You can claim any other travel-related expenses as long as they satisfy one of two tests:

1. You’ve incurred the charge ‘wholly and exclusively’ for business purposes (or in the course of your employment).
2. The expenditure has an element of private use, but you can show you used a ‘definite proportion’ of it ‘wholly and exclusively’ for business purposes. For example, you can distinguish between business mileage and private mileage.

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:

• Parking fees
• Congestion charges
• Public transport
• Hotel accommodation if you need to stay overnight

What about the cost of food and drink while I’m away?

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:

• You have to stay away from home overnight.
• You’re travelling wholly and exclusively for business reasons.
• You leave as soon as the business purpose ends. So, as soon as your conference is over, you can’t stay on for a few extra days to do some sightseeing and claim the food bill on your taxes.
• The expense is reasonable.

What other expenses can I claim on my taxes?

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:

• You incurred it wholly and exclusively for business purposes.
• If there’s a personal element, you can easily separate it from the business element. You’ll also need to prove you used a ‘definite proportion’ wholly and exclusively for business purposes.
• If you’re employed, your employer hasn’t reimbursed you. If your employer has only repaid part of the cost, you can deduct the remainder.
• You keep the receipts.