In this section:
- A-Z list of expenses and benefits: short guidance
- Company cars, vans and fuel
- Mileage expenses for business travel in employees’ own vehicles
- Travel expenses and benefits
- Entertainment expenses and benefits
- Childcare
- Medical insurance and treatment
- Loans (including season ticket loans)
- Relocation expenses and benefits
Travel expenses and benefits
This guide explains the tax and National Insurance contributions (NICs) requirements you must comply with if you provide travel expenses or benefits to your employees.
It sets out what counts as a travel expense or benefit, and explains that you won’t have to pay us any tax or NICs for expenses or benefits that relate to the necessary costs of business travel. It provides step by step instructions on how you need to report these expenses and benefits to us, and on the tax and NICs you may have to work out and pay to us.
The guide doesn’t cover business travel in an employee’s own vehicle. Different rules apply, which are covered in a separate guide – use the link for mileage allowance payments at the end of this guide. This guide also contains a link to our guide on company cars and vans.
On this page:
- What counts as a travel expense or benefit?
- Keep things simple by using a dispensation
- Work out the value to report
- Where to report and what tax/NICs to pay
What counts as a travel expense or benefit?
If you reimburse or pay an employee’s travelling expenses, or provide travel tickets or hotel accommodation for a journey, then you are paying travel expenses or providing a travel benefit.
You don’t have to pay us any tax or NICs on any expenses or benefits you provide to an employee for business travel, but you must still report them to us (unless they’re covered by a dispensation – see the next section). Business travel covers the following two categories:
- journeys that form part of an employee’s employment duties (such as journeys between appointments by a service engineer)
- journeys relating to an employee’s attendance at a temporary workplace (note that a workplace isn’t temporary if an employee can expect to be there for more than 24 months, or for all or almost all of their time working for you)
For other types of travel, the specific reporting and tax/NICs requirements you must comply with depend on the kind of journey involved and the way in which you provide your employee with the expense or benefit. The steps to take in different situations are outlined in the section ‘Where to report and what tax/NICs to pay’.
Note that separate rules apply if you provide an employee with a company car or van, or if you make payments to them for business journeys they make using their own vehicle. These rules are explained in two of our other guides – use the links below.
More about providing company cars and vans
More about mileage allowance payments
Keep things simple by using a dispensation
If you provide business transport for an employee (excluding a company car or van, as these are covered by separate rules), or you pay or reimburse no more than the necessary costs of an employee’s business travel, then you can arrange a dispensation with us to cover these expenses and benefits.
Items covered by a dispensation do not need to be reported to us and you won’t have to pay any tax or NICs on them. For more information about how to set up a dispensation, see our separate guide on the topic – use the link below.
Note that you cannot include in a dispensation any payments related to an employee’s business travel in their own vehicle.
More about reducing expenses and benefits admin with a dispensation
Work out the value to report
Unless you have arranged a dispensation (in which case there is nothing to report) the value to report is the cost to you of providing your employee with the travel-related expense or benefit.
Note that if you pay or reimburse more than the actual cost of an employee’s business travel, the reportable value for PAYE (Pay As You Earn) tax purposes is different from that for NICs purposes. This is explained in the next section.
Where to report and what tax/NICs to pay
The forms you’ll need to use and the tax or NICs you may need to pay to us differ depending on the way you provide travel expenses and benefits, as explained below.
The quickest way to complete the forms mentioned below is to use our free ‘Online Return and Forms’ service, the interactive forms on our Employer CD-Rom, or a commercial payroll software package.
You reimburse an employee with no more than the necessary costs of business travel
You do not have to pay us any tax or NICs, but you must record the amount reimbursed in section N of form P11D for company directors and for employees earning at a rate of £8,500 or more per year.
There is no need to record reimbursed business travel expenses on form P9D for employees earning at a rate of less than £8,500 per year.
In addition to the direct costs of transport, such as plane or train tickets, the ‘necessary costs’ of travel also include items such as parking charges (but not fines), road tolls and congestion charges.
You reimburse an employee with more than the necessary costs of their business travel
This counts as extra earnings and attracts both PAYE tax and Class 1 NICs. However, the value to use differs for PAYE tax and Class 1 NICs purposes:
- add the full amount reimbursed to the employee’s gross pay when calculating and deducting PAYE tax through your payroll using form P11
- add only the excess (above the necessary costs of the business travel) to gross pay when working out Class 1 NICs
You must also report the full amount reimbursed in section N of form P11D (for company directors and for employees earning at a rate of £8,500 or more per year) or section A(1) of form P9D (for employees earning at a lower rate than that).
You arrange and pay for transport to take an employee between their home and permanent workplace
You must pay us Class 1A NICs on the value of the benefit at the end of the tax year if it is provided to a company director or to an employee earning at a rate of £8,500 or more per year. You must also record the value in Section F, G, K, L or M of form P11D for these employees.
There is no need to pay us anything or record the value on any forms if you provide the benefit to an employee earning at a rate of less than £8,500.
There are a number of exceptions. You do not have to report the benefit or pay any NICs to us on it in any of the following cases:
- you provide a works bus service, available to all your employees (there are conditions – for more information, use the link at the end of this list)
- the transport is for an employee with a disability (this only applies in certain limited circumstances – contact us for further information)
- your employee takes a taxi home after late-night working (there are conditions – for more information, use the link at the end of this list)
- the transport is to replace a car-sharing system that is unavailable due to unforeseen circumstances
- you lend or hire cycles or cycle safety equipment to your employees (there are conditions – for more information, use the link at the end of this list)
- you provide or pay for employee transport between home and work where public transport has been disrupted by industrial action
- you provide a car, motorcycle or cycle parking space at or near an employee’s place of work
Exemption for works bus services – the conditions that apply
Exemption for late-night taxis – the conditions that apply
Exemption for cycles – the conditions that apply
Your employee arranges transport between their home and permanent workplace, but you pay the provider directly
You must pay us Class 1 NICs, irrespective of the employee’s earnings. Add the value of the transport to gross pay when recording and calculating Class 1 NICs (but not PAYE tax) through your payroll using form P11.
No Class 1A NICs are due. But you must also record the value of the benefit in section B of form P11D for employees earning more than £8,500, or in section A(2) of form P9D for those earning at a rate of less than £8,500.
These procedures don’t only apply to transport between home and work – they apply to any non-business journeys arranged by an employee for which you pay the provider directly.
There are a number of exceptions. You do not have to report the benefit or pay any NICs to us on it in any of the following cases:
- you provide a works bus service, available to all your employees (there are conditions – for more information, use the link at the end of this list)
- the transport is for an employee with a disability (this only applies in certain limited circumstances – contact us for further information)
- your employee takes a taxi home after late-night working (there are conditions – for more information, use the link at the end of this list)
- the transport is to replace a car-sharing system that is unavailable due to unforeseen circumstances
- you lend or hire cycles or cycle safety equipment to your employees (there are conditions – for more information, use the link at the end of this list)
- you provide or pay for employee transport between home and work where public transport has been disrupted by industrial action
- you provide a car, motorcycle or cycle parking space at or near an employee’s place of work
Exemption for works bus services – the conditions that apply
Exemption for late-night taxis – the conditions that apply
Exemption for cycles – the conditions that apply
Your employee arranges and pays for transport between their home and permanent workplace, and you reimburse them
This counts as providing extra pay to your employee, so you must pay us PAYE tax and Class 1 NICs on the value of the transport. Add the value to the employee’s gross pay when recording and calculating PAYE tax and Class 1 NICs through your payroll using form P11.
No Class 1A NICs are due, and the transport doesn’t need to be recorded on forms P11D (for employees earning at a rate of more than £8,500 per year) or P9D (for those earning less than that).
There are a number of exceptions. You do not have to report the amount reimbursed or pay any NICs to us on it in any of the following cases:
- the transport is for an employee with a disability (this only applies in certain limited circumstances – contact us for further information)
- your employee takes a taxi home after late-night working (there are conditions – for more information, use the link at the end of this list)
- the transport is to replace a car-sharing system that is unavailable due to unforeseen circumstances
- you provide or pay for employee transport between work and home where public transport has been disrupted by industrial action
- you provide a car, motorcycle or cycle parking space at or near an employee’s place of work
Exemption for late-night taxis – the conditions that apply
Your employee arranges and pays for transport for a non-business journey, and you reimburse them
This counts as providing extra pay to your employee, so you must pay us PAYE tax and Class 1 NICs on the amount reimbursed.
To do this, add the amount to the employee’s other earnings for the pay period in question when recording and calculating PAYE tax and Class 1 NICs through your payroll using form P11.
No Class 1A NICs are due, and the amount reimbursed doesn’t need to be recorded on form P11D or form P9D.
Any other arrangement
If you provide travel expenses or benefits to an employee in any other way, contact our Employer Helpline on Tel 08457 143 143 and we will tell you what you need to do. The helpline is open from 8.00 am to 8.00 pm Monday to Friday, and 8.00 am to 5.00 pm on Saturday and Sunday.
More useful links
An overview of how expenses and benefits work
More detailed information about travel expenses
Read our publication ‘Employee Travel (490)’ (PDF 183K)
The records you should keep of expenses and benefits you provide
Guidance on completing form P11D
