Overnight incidental expenses

Conditions

• The incidental overnight expenses exemption is contained in ss240–241 ITEPA 2003. It applies only where an employer makes a payment or reimbursement to an employee or director in respect of qualifying incidental expenses incurred during an overnight business stay away from home.
• The exemption covers personal incidental costs — items such as newspapers, personal phone calls home, and laundry — that are not sufficiently connected to the duties of employment to qualify for the ordinary travel expense deduction under Part 5 ITEPA 2003. They are personal in nature but incurred only because of the overnight business absence.
• The per-night limits are: £5 per night for stays in the UK; £10 per night for stays outside the UK (s241(3) ITEPA 2003). The limit is calculated as a total for the qualifying period of absence rather than applied strictly night by night. A three-night UK trip has a total allowance of £15.
• The all-or-nothing rule is critical: if the employer's total payment for a trip exceeds the limit (£5 × number of UK nights, or £10 × number of overseas nights), the entire payment becomes taxable income for the employee — not just the amount above the limit. If an employer pays £6 on a one-night UK trip, £6 is taxable, not £1.
• The exemption applies only to employer payments or reimbursements. An employee who pays incidental expenses and is not reimbursed cannot claim a personal tax deduction for them — these costs are not deductible under the personal employment expense rules in Part 5 ITEPA 2003.
• This relief is unavailable to self-employed sole traders. ITEPA 2003 applies to employment income; a sole trader working away overnight has no employer to make the payment, and no equivalent statutory flat-rate exemption exists for the self-employed.
• The incidental overnight expenses exemption is entirely separate from subsistence (meal costs on qualifying journeys) and from accommodation costs, which have their own rules. All three can be relevant on the same overnight trip but are assessed independently.

Common mistakes

• Treating the £5/£10 limit as a per-night 'safe harbour top-up' — if total payments exceed the limit for the trip, the whole amount is taxable, not just the excess.
• Self-employed people assuming this relief is available to them — it is not. The legislation is entirely within ITEPA 2003 and applies only to employment income.
• Confusing incidental overnight expenses with subsistence (meal costs on a qualifying business journey) — these are separate regimes covering different costs.
• An employee trying to claim unreimbursed incidental personal expenses as a personal deduction on their tax return — there is no deduction available under the employment expense rules for these costs.

What to keep

• Employer payroll or expense records showing the trip dates, number of nights, destination (UK or overseas), and the amount reimbursed.
• No individual receipts are required for amounts within the limit, but records of the qualifying overnight period should be retained to demonstrate eligibility.

Real-world example

A company director travels to Edinburgh for a two-night business trip. The company pays her hotel bill (an allowable business travel cost, assessed separately). It also reimburses £8 for personal incidental expenses over the two nights — newspapers and a phone call home. The two-night UK limit is £10 (£5 × 2), so the £8 reimbursement is entirely tax-free. If the company had instead paid £11 for the trip's incidentals, the entire £11 would be treated as taxable employment income for the director — not just the £1 over the limit.

Frequently asked

Related allowances