As a UK contractor, you may incur Personal Incidental Expenses as 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 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 article, we’ll look at PIEs in depth for UK contracting professionals. In addition, we’ll consider 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 is 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 that a business gives an individual as a personal expense allowance.
Per Diem rates (UK) are therefore 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.
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. If you do, you may incur 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 are 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. On the other hand, the allowance could be when a contractor stays away as part of their general contract limited company work. In this guide, we will 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 will 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 are contracting? When you are working away, you will 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.
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 is 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. In addition, please also read our article 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 are 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 you incur on your incidental spending, you can also claim for the PIEs in respect of incidental expenditure. Therefore, as part of your 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 contractor Personal Incidental Expenses examples below. In addition, it is notable that these are small incidental type costs, where you may not have a receipt.
Some 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 would 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 Personal Incidental Expenses examples, what will they include? Indeed, the types of incidental expenses could include several different costs and some incidental costs examples could be:
- Coffees at the airport or train station.
According to the tax office, if any of the overnight incidental expenses you cover in your claims are not exempt, you may 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 of £5 and £10. Therefore, we will 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 on 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 have been at the same level since HMRC brought these in. You do not 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.
In the UK
You can claim for £5 per night, when you are 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 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 are contracting abroad.
Other considerations around Personal Incidental Expenses (HMRC)
If any overnight expenses you claim are not exempt, you may have to report the costs to HMRC. As a result, you will need to deduct and pay tax and National Insurance on these.
What you must do
It is 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 will 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 do not 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 you work meals you need to keep the actual receipts in respect of these expenses. Alternatively, there are 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 will be based at a given work site for more than 24 months.
In the UK, not all contractors are aware of UK per diem rates or the Personal Incidental Expenses allowance. 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 above some incidentals examples. What’s more, these 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 are not yet claiming for the PIEs overnight allowance and can do so, please consider making a claim for these in the future.
Link to Contractor Advice UK group on