Per Diem allowances for business travel in the UK (HM Revenue & Customs) 

The UK saw a significant number of business visitors in 2023, with over 37.1 million visits recorded. [source] 

From securing new clients to fostering stronger partnerships, business travels bring a number of business opportunities along. With opportunities, it carries challenges though. 

For companies, managing these business travel expense reports after each trip is often complex and challenging.  Per diems bring a simpler, more efficient solution to manage business travel expenses. 

Under the regulations of per diems, you no longer need to review receipts for every meal and travel cost that your employee makes during the business trip.  Per diems provide you with a standard daily allowance to reimburse travel expenses to your employees.  

This prevents your additional headache on paperwork after the trip. It also speeds up the reimbursement process. 

Her Majesty’s Revenue & Customs (HMRC), the tax authority of the United Kingdom, sets these per diems allowances.  

In this comprehensive article, we will cover everything else you need to know about per diem in the UK to manage the hassles of your next business trip. 

 We will discuss UK per diem rates of 2024, its types and benefits, HMRC meal allowance rate along with national and international per diem rates UK in 2024, how you can calculate per diem rates for business travel in the UK, and more.  

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#1 – What is a Per Diem? 

Per diem is a Latin word that translates to ‘per day’.  

Per diem allowance is the allowance for employees that covers the cost of meals, accommodation, and incidental expenses on a daily basis during business travel.  

Per diem rates can vary based on location, workdays, hours worked, and even workplaces. However, they offer a standardized and efficient approach to managing travel expenses, saving you time and money in the long run. 

Since per diems are tax-free for employees, your company saves money by using them for work trips. However, if employees spend more than the per diem allowance on meals or other work travel expenses, the company must pay extra tax on that amount. 

#2 – Subsistence Allowance in the UK 

Another term you might hear is “daily subsistence allowance.” They are fixed rates that HMRC adjusts every year.  

What’s the difference between per diem rates and subsistence allowance in the UK? 

Per diem rates are fixed daily allowances set by HMRC to cover various expenses like meals, accommodation, and incidental costs incurred during business travel. They are non-taxable and standardized and do not require employees to provide receipts for specific purchases like meals. 

Subsistence allowance is a broader term. It includes expenses for work-related travel or time spent away from the normal workplace. It covers necessary costs such as :  

• accommodation,  
• parking charges,  
• food,  
• and other essential expenses incurred during business trips.  

Subsistence allowance can include meal costs but extends beyond just food and drink purchases to cover a wider range of expenses associated with business travel. Unlike per diem rates, subsistence allowance may require employees to provide evidence that expenses were incurred while on a business trip.

#3 – Types of Per Diem allowances 

HMRC offers two main categories of per diem allowances: 

Standard Per Diem rates: 

Most businesses don’t have employees traveling constantly. For those occasional work trips, standard per diem rates from HMRC offer a straightforward approach to managing expenses. These rates are based on the duration of the trip. 

Employees on extended day trips (over 5 hours) will receive a higher per diem than those attending a quick meeting nearby. This ensures they have enough to cover a meal, even if they need to grab lunch on the go. 

Thanks to these standard rates, employees do not need to track every expense and submit detailed receipts. This saves everyone time and hassle. 

Bespoke Per Diem rates: 

While standard per diem rates offer substantial benefits, some businesses still need to adopt bespoke per diem rates. These are for those businesses who plan trips more often. If your employees are consistently spending more than the standard amounts, you can apply to HMRC for a custom per diem rate or bespoke per diem rate. 

These allow you to offer higher allowances that better reflect your employees’ typical expenses. This ensures they don’t get personal out-of-pocket costs and have enough funds for their expenses. 

When you have sufficient funds upfront, you minimize the risk of employees exceeding per diems. That’s how you and your employees can avoid potential tax implications. 

However, even in custom rates, you need to have proper expense records. HMRC may ask you for documentation to verify spending.  

#4 – What is an HMRC meal allowance rate? 

HMRC Meal Allowance Rate in the UK is the standardized form of per diem payments that helps you cover the meal expenses of your employees during business travel.  

These are basically set amounts of money the UK government says are fair for meals on business trips. They’re also called “scale rates” and are meant to be simple. Instead of showing receipts for every sandwich and coffee the employees purchase, they can simply claim this set amount to cover their meals. 

Conditions for HMRC meal allowance rates: 

HMRC meal allowance rates offer a simplified way to reimburse employees for meals during business travel. Here’s a quick rundown of the criteria you need to consider: 

• Travel Duration: Employees must be away from their usual workplace for at least 5 hours to qualify for a meal allowance. Short commutes wouldn’t count. 
• Business Purpose: The trip must be for legitimate work reasons. Trips to a temporary worksite or meetings outside the office count. However, personal errands wouldn’t be covered. 
• Meal Incurred: The employee must have purchased and consumed a meal during the qualifying travel time. 

#5 – National Per Diem rates UK 2024 

HMRC regulates per diem rates for both domestic and international business travel from the UK. The national or domestic per diem rates in the UK for 2024, as set by HM Revenue & Customs (HMRC), are based on the duration of travel and specific conditions.  

The currents per diem rates for business travel in the UK 2024 are as follows: 

• £5: Employees away for at least 5 hours qualify for this base rate. 
• £10: For trips exceeding 10 hours, a higher allowance is provided. 
• £25: This top rate applies to trips exceeding 15 hours that continue past 8 pm. 

#6 – International Per Diem rates 2024 

International per diem rates depend heavily on location and trip duration. HMRC has released a full list that shows per diem international rates. 

For example, per diem rates for Sydney, Australia are as follows: 

• Over 5 hours: AU$ 57.50 
• Over 10 hours: AU$ 147.50 
• 24-hour rate: AU$ 195 + room rate (typically AU$ 227) 

They cover accommodation, meals, and incidental expenses employees meet on business trips to specific countries. 

💡 For locations with consistently high expenses (expensive countries or frequent night stays), you can apply for bespoke per diem allowances with HMRC. These need to be reported on a P11D form. 

For international trips, it’s required for employees to keep detailed expense records, so they comply with UK tax regulations regarding per diem payments. 

You need to understand all the ins and outs of international per diem rates to effectively manage employee expenses on overseas business trips.  

#7 – Are Per Diems taxable in the UK? 

As long as per diem rates stay within the legal maximum set by HMRC, the money is tax-free for employees. This is because it’s meant to cover legitimate business expenses like meals and accommodation, not add to their regular salary. 

However, if a per diem rate is too high, the excess amount is considered taxable income. In these cases, employees will need to pay tax on that extra money. They should also report this additional income on a P11D form. 

Sometimes, companies choose round-sum payments as an alternative to per diems. But don’t forget that they are considered taxable income which is subject to regular income tax and National Insurance contributions. 

#8 – Benefits of Per Diem allowances for your business 

Business travel expenses, and per diem rates are a win-win for both the company and your employees. It comes with several benefits: 

Tax-free reimbursement:  

As long as you stay within HMRC limits, per diems allow you to reimburse employees for their work trip expenses without them knowing extra tax. This keeps everyone happy. 

Simplified expense management:  

Per diems is a fixed daily allowance that covers meals, accommodation, and small incidentals. No more detailed reports of every sandwich purchased, or endless paperwork required. It’s a hassle-free solution for both employees and your finance team. 

Cost control and budgeting:  

Per diems set a clear daily spending limit and help you manage your travel budget effectively. You’ll avoid unexpected costs and have a better grasp of overall travel expenses. 

Efficiency for everyone:  

Per diems simplify expense management. Employees can grab a coffee or a snack without worrying about keeping receipts. This saves everyone time and hassle, keeping things efficient.

#9 – How to calculate Per Diem rates for business travel in the UK?

Managing employee expenses on business trips could be made easy with per diem rates using HMRC guidelines: 

1. Start by getting familiar with HMRC’s per diem guidelines. These guidelines tell you exactly how much you can give employees each day for tax-free expenses. 
2. The per diem rate depends on how long the trip lasts. Employees away for 5 hours or more qualify for £5, while those exceeding 10 hours get £10. Trips lasting over 15 hours with travel after 8 pm receive £25. 
3. For trips exceeding 24 hours, you can also claim the room rate on top of the per diem rate. If a situation doesn’t fit the standard rates, you can discuss a “bespoke rate” with HMRC. 
4. Make sure the trip meets specific HMRC criteria. This includes work-related travel, a temporary workplace, a minimum absence from the usual workplace, and meal costs incurred during the trip. 

This is how simply you can calculate per diem rates while staying compliant with tax rules. 

#10 – Internal Revenue Service exceptions 

• Reasonable Amounts & HMRC Guidelines: Per diems exceeding reasonable limits or not following HMRC guidelines might be taxed. This includes round-sum allowances that aren’t approved by HMRC. 
• Employee Eligibility: Per diems shouldn’t be limited to specific staff groups, or they could lose their tax exemption. 
• Vouchers & Cash Equivalents: Vouchers that can be exchanged for cash cannot be counted as business expenses. 
• Salary Sacrifice & Flexible Remuneration: Meals provided under salary sacrifice or flexible remuneration schemes (like zero-hour contracts) aren’t tax-exempt. 

#11 – How often can Per Diem rates be claimed in the UK? 

Per diems in the UK work as a daily allowance for employees on business trips.  This simplifies expense management for everyone.   

Employees can claim per diem rates for each day they’re away, ensuring they’re fairly compensated for work-related expenses during their travels.  The clear and transparent rates eliminate confusion and streamline the process for both employees and your company. 

#12 – Important considerations for Per Diem 

While per diem allowances offer convenience, some factors require attention: 

• Location Specificity: HMRC rates apply to travel within the UK. Different rates may apply for international travel. 
• Actual Expenses vs. Allowances: Per diem allowances are maximum amounts. Employees who spend less keep the difference, while those exceeding the allowance may need to cover the extra cost themselves. 
• Accommodation Costs: HMRC per diem rates primarily focus on meals. Accommodation expenses might require separate expense claims depending on company policy. 

#13 – How to make a strong expense policy for business travel? 

If going per diem for your business travel, you need to make a clear expense policy for managing employee business travel costs effectively. It sets expectations for everyone and helps ensure your company only reimburses allowable expenses. 

While the specifics will depend on your company’s budget, culture, and goals, here are key elements for a strong expense policy: 

• Clear Categories & Limits: Define what expenses can be reimbursed (e.g., meals, accommodation) and set spending limits for each category. This helps the employees to keep the costs in check. 
• Non-Reimbursable Expenses: Clearly outline expenses the company won’t cover, such as personal items, fines, or unauthorized upgrades. This helps avoid confusion and unnecessary claims. 
• Proof of Purchase: Specify acceptable documentation for expense claims, like receipts or invoices. 
• Open Communication: Encourage employees to seek pre-approval for unusual expenses that fall outside standard categories. This fosters transparency and reduces processing delays. 

Conclusion

Per diem allowances, guided by HMRC regulations, provide a practical approach to help you manage business travel expenses in the UK.

Make sure you completely understand the eligibility criteria and the regulations. This can ensure a smooth experience for both employers and employees.

By following HMRC guidelines and implementing clear company policies, per diem allowances can facilitate expense management and make business travel more efficient. 

Do you want to discover how an expense report software can make business travel easier?