What is subsistence allowance?
Subsistence allowance covers reasonable costs of food, drink and sometimes accommodation when someone travels away from their normal workplace for work.
What subsistence allowance means
Subsistence costs are allowable when an employee or business owner is on a qualifying business journey, for example travelling to a temporary workplace such as a client's site. They are not allowable for meals at your usual place of work, or on a normal commute.
Employers can reimburse actual costs against receipts, or pay HMRC's benchmark scale rates without needing receipts, provided they have a system to check that a qualifying journey took place:
| Time away | Benchmark rate |
|---|---|
| 5 hours or more | £5 |
| 10 hours or more | £10 |
| 15 hours or more and ongoing at 8pm | £25 |
| Working late past 8pm after a normal day | £15 late evening meal |
For overnight stays, reasonable hotel costs and meals can be reimbursed. HMRC publishes separate rates for travel abroad.
Example
A consultant leaves home at 7am to work at a client's office in Leeds and is back at 7pm, twelve hours away. Her company can pay her the £10 benchmark rate tax-free, or reimburse her actual lunch and coffee receipts of £14.60. Either way the cost is deductible for the company and not taxable for her.
What records to keep
Keep receipts for actual costs, and a note of the journey: date, destination, purpose and times away. If paying benchmark rates, the employer must have a checking system, such as sampling claims against diaries or travel records. Without one, HMRC can treat the payments as taxable pay. Directors should apply the same discipline to their own claims as to any employee's.
Why it matters for your business
Paid correctly, subsistence carries no tax or National Insurance for anyone. Paid incorrectly, it becomes taxable pay. Sole traders can claim the actual cost of meals on genuine overnight trips or when travelling outside their normal pattern, but not a daily lunch. Keep receipts and a note of where you went and why. Cloudkeepers can set up an expenses policy that keeps claims within the rules.
Subsistence vs entertainment
Buying your own lunch on a business trip is subsistence. Buying lunch for a client is entertainment, which is treated very differently and is not deductible.
Common questions
No. Meals at your normal place of work, or on days when you are not on a qualifying business journey, are personal costs. Subsistence only applies when you are travelling for business away from your usual workplace, and costs must be reasonable.
Yes, directors are employees of their company, so the same rules apply. The company must still have a way to check that each payment relates to a qualifying journey, such as a travel log or calendar, so keep records of where you were and why.