How to Understand HMRC’s Rules on Commuting in the UK
Do you use your personal car, van or other vehicles for work-related travel? While you might think your commute forms part of your tax-deductible business mileage, this isn’t usually the case.
Here’s an in-depth look at HMRC’s rules on commuting and other tax-deductible mileage expenses.
How does HMRC define a commute for tax purposes?
HMRC defines a commute as the journey you make most days between your home and your permanent workplace. HMRC calls this “ordinary commuting.”
A commute can also be the journey between your permanent workplace and another place that is unrelated to work. For example, if you go to the gym after work, HMRC would count the journey between your office and the gym as a commute.
Is commuting tax deductible?
Sadly, no. HMRC doesn’t consider commuting to be a business journey. This means that, as a rule, you cannot deduct the mileage from your taxes when you drive from home to your usual workplace. Or when you drive between your workplace and another place that is unrelated to work.
Is there a way to deduct my commute from my taxes?
Yes. There is one exception. Your “commute” is tax deductible if:
- You must temporarily work at a different location from your usual workplace.
- The journey is significantly different from your usual commute. So, the exception won’t apply if the temporary workplace is geographically located quite close to your usual workplace.
- You’ll be working there for less than two years.
- You spend less than 40 percent of your work week at this location.
Can I deduct business mileage if I work from home?
If you’re self-employed and you work from home, you technically don’t have a commute. This means you can usually deduct the mileage when you travel from home for work-related purposes.
However, do be careful.
HMRC have recently started cracking down on self-employed people who claim they work from home but regularly work from somewhere else. This means you have to make sure there is enough evidence to show that your primary and permanent workplace is indeed your home.
Typically, HMRC takes a case-by-case approach to this. However, you’ll usually have to show them that you perform “substantive duties” from home on a regular basis. In other words, you must show that, most of the time, you carry out the core parts of your business activities from your home office.
Let’s say you’re a self-employed writer.
You do the bulk of your writing in your home office. You also reply to emails, do your bookkeeping and carry out other administrative tasks from home.
Sometimes, you use your personal car to drive to client meetings.
In this case, you clearly carry out substantive duties at your home office, because you do most of your writing from there. This means you can deduct the drives between your home office and client meetings from your taxes.
Let’s say you’re a barrister.
You spend your mornings in court, arguing cases. And in the afternoon, you’re in chambers doing research and writing up legal briefs. You also have a home office, where you do your bookkeeping and answer emails.
In this case, you don’t carry out substantive duties at your home office. What you do is mainly administrative. As a result, you cannot deduct business mileage when you drive between your home office and court.
What is HMRC’s commuting rule for employees who work from home?
If you’re an employee who works from home, you may, in some circumstances, deduct drives to your company’s premises. However, you’ll need to show HMRC that:
- Your home is a workplace (more on this later).
- The location of your home is dictated by your job. For example, you’re the sales manager for Edinburgh, but your company only has an office in London.
- Your home is a workplace at the time of the journey. So, if your home is a workplace on Mondays but you work from the office for the rest of the week, you can only claim business mileage on these drives on Mondays.
- You can still deduct business mileage when you drive from home to a temporary workplace.
When is my home a workplace for tax purposes?
If you’re an employee, HMRC usually considers your home to be a workplace for tax purposes if you satisfy all of the following conditions:
- You carry out “substantive duties” at home, that is duties that are a central part of your job.
- You need “appropriate facilities” to do your job. These don’t necessarily have to be special equipment. A laptop and office space are “appropriate facilities” too.
- The “appropriate facilities” are not available at your company’s premises. Alternatively, your job forces you to live so far away from the company’s premises that it’s unreasonable to expect you to commute.
- Your employer has never offered you a choice whether to work at the premises or from home.
Example: When your home counts as a workplace
Let’s say you’re an accountant.
You work for a small company that has limited office space. Your employer specifically hired you on the basis that you’ll work from home because there’s no room for you at their premises.
Here, your home would qualify as a workplace. Which means you can deduct business travel from home to your company’s premises.
In summary: What you need to know about HMRC’s commuting rules
- Driving from home to your normal workplace is never tax deductible.
- Driving from home to a temporary workplace is tax deductible.
- If you’re employed and work from home, you can only deduct business miles if you can show that your home is a workplace and that you work from there by necessity, not by choice.
- If you’re self-employed and work from home, you don’t technically “commute.” However, you may still have to show HMRC that you carry out “substantive activities” at home.
All clear? Great.
Now, let’s have a look at the type of mileage you can deduct and how to calculate it.
What mileage can I deduct from my taxes?
You can deduct mileage from your taxes if it relates to drives you made ‘wholly and exclusively’ for business purposes. HMRC considers this to mean one of the following:
- The journey is an essential part of your work, for example, you’re a delivery person or taxi driver.
- You go somewhere other than your usual workplace to do your job. For example, an architect making an on-site visit.
- The main purpose of your journey is business. You can’t turn a private journey into business travel by running a work-related errand on the way.
How do I calculate tax deductible business mileage costs?
To calculate your tax-deductible business mileage costs:
- Tot up all your business mileage for the tax year. You can do this by keeping a manual log of each business drive or by using an app like MileIQ, which automatically tracks your mileage.
- Multiply your business mileage by HMRC’s Approved Mileage Allowance Payment rate, or AMAP.
- If your employer reimburses you for your business mileage, you can only claim the difference between what your employer paid you and the AMAP rate.
- If you’re an employee claiming less than £2,500 business mileage, use Form P87. Alternatively, you’ll need to complete a self-assessment tax return.
Calculating tax deductible business mileage costs: Example
Let’s say you use your personal car for work. During the 2017 / 18 tax year, you drove 9,000 business miles.
Your employer has reimbursed you at a rate of 10p per mile.
HMRC’s current AMAP rates are:
|Type of Vehicle||First 10,000 Miles||Above 10,000 Miles|
|Cars and Vans||45p||25p|
Since your employer has already reimbursed you at a rate of 10p per mile, you can only claim 45p less 10p, so 35p per mile.
To find your tax-deductible business mileage costs, you’d multiply 9,000 miles by 35p, which would give you £3,150.
What are other travel expenses that are tax deductible?
In addition to mileage, you can also deduct the following travel expenses. But only as long as you’ve incurred them “wholly and exclusively” for business purposes:
- Parking fees and congestion charge.
- Motorway tolls.
- Hotel accommodation.
- If you’re self-employed and VAT-registered, VAT on these costs. You have to register for VAT if your annual turnover is more than £85,000.
Can I claim tax back on food while I’m away on business?
As a rule, you can’t. Everyone has to eat and drink to live. So, HMRC doesn’t consider them to be expenses you’ve incurred “wholly and exclusively” for business.
That said, HMRC does accept that you may have to incur extra costs if you’re away on business. So, you may be able to deduct the cost of food and drink if you stay somewhere overnight for business purposes, for example, because you’re attending a conference far from home.
But forget the lobster and the champagne. You’ll still have to prove that the costs were “reasonable.”