Understanding Employee Benefits and Expenses – Travel and More…

Managing employee benefits and business expenses is a great opportunity to build a positive culture, reward your team and stay on the right side of HMRC. 

Here’s a simple guide to help UK employers understand what’s tax-free, what needs reporting and how to keep things efficient.

Record Keeping: The basics

Good records mean fewer headaches later. Employers should keep a clear log of:

• The date and purpose of each business journey 
• Distance travelled 
• Receipts for expenses (unless using HMRC-approved scale rates) 

Tip: Most tax-free expenses don’t need to be reported to HMRC. But taxable ones like healthcare or over-the-limit mileage must go through payroll or a P11D form.

Travel & Subsistence: What can you reimburse

Expenses can be reimbursed if they’re wholly, exclusively and necessarily for business. This includes:

• Travel to temporary workplaces or between business locations 
• Meals and overnight stays 
• Incidental expenses during business trips 

HMRC approved mileage rates:

• Cars & Vans: 45p/mile (first 10,000 miles), 25p/mile (after that) 
• Motorcycles: 24p/mile 
• Bicycles: 20p/mile 

Anything paid above these rates is taxable. Anything below? Employees can claim tax relief via their self-assessment.

Key dates to remember

• 6th July 2025: P11D Submission Deadline 
• 31st January 2026: Self Assessment Tax Return Deadline 

Benchmark & bespoke scale rates

Want to simplify meal reimbursements?

• HMRC offers scale rates to cover meals and travel 
• No receipts needed (if using bespoke rates) 
• Bespoke rates must be agreed with HMRC and supported by an ‘expense sampling exercise’ 

Trivial benefits: Small perks, big smiles

HMRC allows certain non-cash perks to be tax-free, so long as they are:

• £50 or less (inc. VAT) 
• Not cash or exchangeable for cash 
• Not a reward for work or performance 
• Not part of a contract or salary sacrifice scheme 

For Directors of close companies:

There’s an annual limit of £300, including any benefits to family or household members.

Tax-free extras for employees

Some other tax-free perks to consider:

• Long Service Awards: Tax-free if over 20 years of service and max £50 per year 
• Christmas Parties: Up to £150 per head if open to all staff 
• Mobile Phones: One phone per employee (including monthly bills and calls), as long as the phone is company-owned 

Tax Implications: What you and your team should know

• Employees:
  Tax is due on most benefits unless exempt. Some can be offered via salary sacrifice, helping employees save on tax and NICs. 
• Employers:
  Taxable benefits often qualify as deductible expenses. However, you’ll usually pay 13.8% Class 1A NICs on their value.

Need Help?

Structuring your benefits and managing expenses can be complex but it doesn’t have to be. We help businesses create reward packages that work for both your team and your bottom line.