Travel Expenses: Exempt or Taxable?

What employers need to know.

If your employees travel as part of their job—whether from home or their regular workplace—you probably cover the cost. But here’s the key question:

Should you be deducting tax and National Insurance (NI) from those payments, or are they exempt?

Let’s break down the rules to help you stay compliant and avoid any unwelcome surprises from HMRC.

Tax-Free or Taxable?

One of the trickier parts of being an employer is deciding if certain expenses—like travel—are exempt from tax and NI. If they qualify as job-related, you can pay or reimburse the costs tax and NI free, without needing to report them to HMRC.

But if they don’t qualify? Then you’ll need to treat those payments as taxable earnings or benefits in kind, depending on who’s liable for the cost.

Travel expenses include more than just fuel or train tickets—they can also cover accommodation, meals, and other related costs.

When Are Travel Expenses Exempt?

Travel costs can be paid tax and NI free if they are:

1. Incurred in the course of the employee’s duties (e.g. a sales rep visiting clients); or

2. For journeys to a temporary workplace that’s not the employee’s usual place of work (e.g. an engineer attending a site for a repair job).

   
   

Watch out: The second point is where things get tricky—because you need to distinguish between temporary workplaces and ordinary commuting.

What Is “Ordinary Commuting”?

This refers to travel between home and a permanent workplace. HMRC defines a permanent workplace as somewhere the employee regularly works, and a temporary workplace as a location visited only for a limited duration or specific task.

🔍 Let’s look at two examples:

• Henry is a regional manager who visits the same few branches every week. These branches are treated as permanent workplaces, so the travel expenses his employer pays are taxable and subject to NI.

• Jack works at head office but is sent to other branches a few times a year to conduct audits. These are temporary workplaces, so the travel expenses are exempt from tax and NI.

  
  

What About Journeys That Start at Home?

Some old-school tax inspectors might claim that any journey starting or ending at home counts as commuting—and therefore is taxable. But that’s outdated thinking.

Under current rules, what matters isn’t where the journey starts or ends, but whether it meets the criteria for exemption. If it’s for a temporary workplace or part of the employee’s duties, it can still be tax-free—even if the journey begins at home.

Tip: If you’re ever challenged by an inspector clinging to old rules, point them to HMRC’s own guidance. It clearly supports the modern, practical interpretation.

Final Takeaway

If an employee travels:

• Between home and a permanent workplace, or

• Between permanent workplaces (e.g. the same offices each week),

Then any costs you cover are taxable and subject to NI.

But if the travel is:

• In the course of their work duties, or

• To a temporary workplace,

Then the expenses are generally exempt.

Need help making sense of what’s taxable and what’s not? Get in touch—we’ll make sure your expense policies are compliant and your payroll stays headache-free.