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 overall limited company contractor tax-deductible expenses. However, what are incidentals for UK contractors who work away? Basically, the incidental allowance meaning effectively translates as a reimbursement to employees for sundry costs while working. In this guide, we’ll look at PIEs for incidental overnight expenses in depth for UK contracting professionals. What’s more, we’ll research what is an incidental cost and view some Personal Incidental Expenses examples.

When we consider what is an incidental allowance and the definition of incidentals, it’s a type of allowance which covers your daily incidentals while working away overnight. This can also be called Per Diem, however what’s Per Diem for contractors? Basically, the PIEs are similar to 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 personal credit card or out of petty cash. Therefore, the PIEs are effectively like a HMRC Per Diem (UK) allowance. Consequently, you should ensure you claim your contractor Per Diem allowance (UK) when you’re able to do so.

Initial thoughts on Personal Incidental Expenses

What to think about first

When you incur contractor travel expenses as part of your working day, you may work away from home overnight on some occasions. As part of staying away, you’ll incur hotel bills or other accommodation costs and possibly some incidental overnight expenses. However, what are incidental expenses and what do they include? Basically, when we consider what is an incidental expense, PIEs are an incidental expense allowance and they’re 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 incidentals allowance could be in respect of 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 take a look at some examples of Personal Incidental Expenses for contractors.

Work locations and expenses

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

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 you’re working away, you’ll no doubt spend small amounts of money for incidental expenses. Therefore, although personal incidentals are non-business, the PIEs allowance is an overnight expenses allowance and it covers 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 website, we have many other guides which help you navigate the world of UK contracting. Indeed, many of these cover other types of business expenses. What’s more, we explain what you can claim under current HMRC rules.

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

How do Personal Incidental Expenses (UK) work? 

Make a claim for PIEs 

When you are 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 make sure you claim the incidental overnight expense allowance when you stay away from home for business.

Besides the travel expenses paid as part of your work travel, you can also claim PIEs in respect of incidental expenditure. Therefore, as part of your incidental spending expenses, please ensure you include any PIEs on your expense report. Incidental travel expenses will include sundry-type incidental costs you will incur while working away. We also detail several PIEs examples below. What’s more, it’s notable that these are small incidental type costs, where you may not have a receipt.

Contractor Personal Incidental Expenses examples -what do they cover? 

What are examples of incidental expenses when you are contracting in the UK? Basically. contractor PIEs are an available allowance for your UK contracting business. What’s more, they cover items which you’d not incur if you were at home. As a UK contractor, you can claim this overnight allowance working away at a client site. Next, if we now look at some examples of what you can claim for PIEs, what’ll they include? Indeed, the types of incidental expenses could include 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.

Besides the above Personal Incidental Expenses examples, there may be other sundry costs included. According to the tax office, if any of the overnight incidental expenses you cover in your claims aren’t exempt, you’ll have to report the costs to the tax office. Basically, the word `exempt’ on the HMRC website relates to the given limits for incidental overnight expenses (please see later on). Therefore, we’ll conclude that HMRC means PIES would need reporting to them if they exceed the given limits. If you need to report these to HMRC, this will result in deducting PAYE tax and National Insurance Contributions from the amounts paid.

The available rates for Personal Incidental Expenses 

There are fixed allowances available for HMRC incidental expenses, when you make a claim for these. The tax office set these rates and they’ve been at the same level since HMRC brought these in. You don’t have to report or pay anything to HMRC in respect of incidental overnight expenses if you claim no more than the current prescribed rates per night.

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

In the UK

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

Outside the UK

You can claim £10 per night in respect of incidental personal expenses for travel outside of the UK when you’re contracting abroad.

Other considerations around Personal Incidental Expenses (HMRC) 

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

What you must do

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

  • Report them on form P11D to HMRC. Basically, 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. Basically, 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 need 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. What’s more, you can claim this for each night you spend away from home for work-related reasons to cover your incidental costs.

Working away meals and benchmark scale rates

While working away overnight, you can also claim for your meal costs. However, for your work meals you need to keep the actual receipts in respect of these expenses. Alternatively, there’s also some meal and overnight subsistence rates provided by HMRC. Basically, these are known as benchmark scale rates which you may be able to claim without receipts. However, if you would like to make a claim for these scale rates, please seek advice from your accountant.

The 24-month rule 

As a UK contractor, you should also remember that you cannot claim for PIEs if you fall foul of the 24-month rule for contractors. This rule relates to a worker being unable to claim for travelling costs once they know that they’ll be based at a given work site for more than 24 months.

Final thoughts 

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

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Published On: January 4th, 2024 / Categories: Expenses, featured, Most Read Articles /

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