Personal Incidental Expenses 0an overnight allowance

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Introduction 

As a UK contractor, you may incur Personal Incidental Expenses while working at a particular worksite. However, what are incidental costs while you’re working away? Indeed, Personal Incidental Expenses (PIEs) for contractors, business owners and employees are an overnight allowance while working away. PIEs are an incidental allowance to cover sundry costs while you work away. Therefore, you can claim these as part of your limited company contractor tax-deductible expenses. However, what are incidentals for UK contractors who work away? The incidental allowance meaning translates as reimbursements to employees for sundry costs while working away. This guide will examine PIEs for incidental overnight expenses for UK contracting professionals. Moreover, we’ll research what an incidental cost is and view some examples of Personal Incidental Expenses.

Considering what an incidental allowance is and the definition of incidentals, it covers your daily incidentals while working away overnight. This can also be called Per Diem; however, what’s Per Diem for contractors? The PIEs are like a Per Diem rate (Latin for per day or daily) or daily allowance. However, how does Per Diem work for contractors? A Per Diem rate (UK) is a specific amount of money a business gives an individual as a personal expense allowance.

Per Diem rates (UK) are typically an amount per employee per day to cover their out-of-pocket personal expenses. These are incurred when travelling on the employer’s business and incurring an overnight stay. Furthermore, the employee may incur an incidental cost on their own personal credit card or out of petty cash. Therefore, the PIEs are effectively like an HMRC Per Diem (UK) allowance. Consequently, you should ensure you claim your contractor Per Diem allowance (UK) when you work away overnight.

Initial thoughts on Personal Incidental Expenses 

First thoughts 

When you incur contractor travel expenses as part of your working day, you may work away from home overnight on some occasions. You’ll incur hotel bills or other accommodation costs and possibly some incidental overnight expenses as part of staying away. However, what are incidental expenses, and what do they include? If we consider what an incidental expense is, PIEs are an incidental expense allowance available to business owners and employees.

Therefore, the PIEs allowance is available when you stay away from home overnight for work reasons and incur incidental items. Indeed, this incidental allowance could be for a one-off business trip in another city where you incur meals and incidental costs. Alternatively, the allowance could be for business travel when a contractor stays away as part of their limited company work. In this guide, we’ll look at some examples of Personal Incidental Expenses for contractors.

What to consider for work locations & expenses?

As a director who runs your UK company, you may travel to different locations for business reasons. Therefore, if you stay away from home overnight for work-related reasons, you may incur incidental travel expenses.

To summarise the Personal Incidental Expenses meaning, you’ll more than likely incur some personal incidental overnight expenses when your work involves a stay away from home overnight. However, what is considered an incidental expense when you’re contracting? When working away from home, you’ll no doubt spend small amounts on incidental expenses. Therefore, although personal incidentals are non-business, the PIEs allowance is an overnight expenses allowance, covering such personal expenses. When you can claim the overnight allowance, it can be part of your overall business expense report, saving your company tax.

Other guides 

On this contractor website, we’ve many other guides that help you navigate UK contracting. Indeed, many of these cover different types of business expenses. Moreover, we explain what you can claim under current HMRC rules.

It’s vital to note that limited company contractors often miss another expense. This is called Trivial Benefits, and they are worth claiming if you have your own company. Moreover, please read our guide, which covers tax tips for UK contractors.

How do Personal Incidental Expenses (UK) work? 

Claim for PIEs 

When claiming travel expenses as a contractor, the overnight allowance for PIEs can often be missed. Indeed, this is especially the case while you’re busy contracting away from home. Therefore, please claim the incidental overnight expense allowance when you stay away from home for business.

In addition to the travel expenses paid as part of your work travel, you can claim PIEs for incidental expenditures. Therefore, please ensure you include any PIEs on your expense report as part of your incidental spending expenses. Incidental travel expenses will include sundry-type incidental costs you incur while working away. We detail several PIE examples below. Moreover, these are small incidental costs for which you may not have a receipt.

Contractor Personal Incidental Expenses examples -what do they cover? 

What are examples of incidental expenses when you’re contracting in the UK? Contractor PIEs are an available allowance for your UK contracting business. Moreover, they cover items you’d not incur at home. As a UK contractor, you can claim this overnight allowance working away at a client site. Next, if we look at some examples of what you can claim for PIEs, what will they include? Indeed, the types of incidental expenses could consist of several different costs, and some incidental costs examples could be:

  • Telephone calls home.
  • Expenses for laundry.
  • Buying newspapers.
  • Coffees at the airport or train station.

Other sundry costs may be included besides the above Personal Incidental Expenses examples. According to the tax office, if any of the overnight incidental expenses you cover in your claims aren’t exempt, you must report the costs to the tax office. The word `exempt’ on the HMRC website relates to the limits for incidental overnight expenses (please see later). Therefore, we conclude that HMRC means PIES must be reported to them if they exceed the limits given. If you must report these to HMRC, PAYE tax and National Insurance contributions will be deducted from the amounts paid.

What are the available rates for Personal Incidental Expenses? 

Fixed allowances are available for HMRC incidental expenses when you claim them. The tax office set these rates, which have been at the same level since HMRC introduced them. You don’t have to report or pay anything to HMRC regarding incidental overnight expenses if you claim no more than the current prescribed rates per night.

HMRC explain incidental overnight expenses on their website; further details can be found in Appendix 480.

In the UK

You can claim £5 per night when you’re staying away in the UK overnight. Indeed, this is the rate of incidental personal expenses allowed when you travel within Great Britain. For example, these apply while contracting and staying in a hotel overnight or renting temporary accommodation in the UK.

Outside the UK

When you travel outside the UK as part of a contract abroad, you can claim £10 per night for incidental personal expenses.

Other thoughts on Personal Incidental Expenses (HMRC) 

If you claim any overnight expenses that aren’t exempt, you may have to report the costs to HMRC. As a result, you must deduct and pay tax and National Insurance on these.

What must you do if you pay more than the PIE rates?

It’s important to note for incidental charges above the £5 or £10 thresholds, you must:

  • Report them on form P11D to HMRC. The P11D form is completed once per year after the end of the tax year.
  • Deduct PAYE tax and Class 1 National Insurance through your payroll and pay this to HMRC. You’ll use the amount you pay your employee, not just the amount above the thresholds.

Receipts for Personal Incidental Expenses

When you claim for the PIEs overnight allowance, you don’t have to keep receipts for tax purposes. As a result, you can claim the fixed rate of £5 or £10 per night for your travel incidentals. Moreover, you can claim this for each night you spend away from home for work-related reasons to cover your incidental costs.

Working away meals & benchmark scale rates

While working away overnight, you can claim your meal costs. However, you must keep the actual receipts for your work meals. Alternatively, HMRC provides meal and overnight subsistence rates. These are known as benchmark scale rates, which you may be able to claim without receipts. However, if you’d like to claim these scale rates, please seek advice from your accountant.

The 24-month rule 

As a UK contractor, you should remember you can’t claim for PIEs if you fall foul of the 24-month rule for contractors. This rule relates to a worker’s inability to claim for travel costs once they know they’ll be based at a given work site for more than 24 months.

Final thoughts 

Not all contractors know about the UK per diem rates or the Personal Incidental Expenses allowance. Above, we set out some examples of Personal Incidental Expenses you may incur while working away. Therefore, besides claiming for your usual UK contractor travel expenses when you stay out overnight, you can also claim the PIEs allowance. Indeed, we detail in our earlier incidental examples what this could cover, and the PIEs can make a difference when you’re UK contracting. Indeed, this is especially the case if you’re staying away from home overnight regularly during the year. Therefore, if you’re not yet claiming the PIEs overnight allowance and can do so, please consider making a claim for these in the future.

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Published On: April 6th, 2024 / Categories: Expenses, featured, Most Read Articles /

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