Travelling Allowance Meaning: UK Guide to Travel & Subsistence (S&T) Expenses

If you're a CFO, financial controller, or finance manager at a UK SME, getting to grips with travelling allowances and subsistence expenses is about more than policy – it’s key to compliance, employee satisfaction, and cost control. 

This guide breaks down what a travelling allowance means, how it works in practice, and why having a clear S&T allowance policy can save time, reduce risk, and make your finance function more efficient. 

What is a travelling allowance? 

A travelling allowance is money an employer pays to cover the cost of an employee’s business travel – for example, attending client meetings, conferences, or visiting other office locations. 

What does a travel allowance typically cover? 

• Train, plane, or bus fares 

• Taxi or ride-share costs 

• Mileage reimbursement (if using a personal vehicle) 

• Parking fees or tolls 

• Wi-Fi or minor travel-related expenses 

The goal? Your employee shouldn't have to fund business travel out of their own pocket, and your finance team needs a clear record for accurate reporting. 

Travel allowance vs subsistence allowance: What's the difference? 

While a travel allowance pays for the journey itself, a subsistence allowance covers the cost of meals, accommodation, and incidentals when employees are away from home. 

Breakdown: 

• Travel allowance = The cost of getting from A to B 

• Subsistence allowance = The cost of supporting the employee while they’re away (food, lodging, incidentals) 

Together, these form what’s often called a travel and subsistence allowance – or S&T allowance for short. It’s common for UK SMEs to include both in a single travel and expense policy to simplify claims and budgeting. 

Real-world example: Travel & subsistence in practice 

Let’s bring this to life with a real-world example.  

Imagine you have a salesperson, Alice, who works at your SME in Leeds and needs to visit a client in Manchester for the day.  

Here's how travel and subsistence allowances would apply: 

• Travel allowance: Her £70 train ticket and £10 taxi ride are reimbursed. 

• Subsistence allowance: Lunch and coffee (£18 total) are reimbursed under a £20 daily meal cap. 

• Overnight stay: If Alice stays the night, her £110 hotel bill and £25 dinner also qualify under the company’s S&T allowance. 

Your S&T policy may offer per diems or reimburse actual expenses with receipts – both are acceptable, as long as you stay within HMRC’s rules. 

HMRC rules: When are travel & subsistence expenses tax-free? 

To be reimbursed without tax implications, expenses must be: 

• Incurred “wholly, exclusively, and necessarily” for business 

• Related to a temporary workplace 

• Incurred after travel begins 

• In line with HMRC’s scale rates 

HMRC’s domestic benchmark meal rates (UK): 

• £5 for trips lasting 5+ hours 

• £10 for 10+ hours 

• £25 for 15+ hours (or overnight stays) 

• Additional £10 for working beyond 8 pm 

You can find the official HMRC scale rate guidelines here. 

As long as you stay within these guidelines, both travelling allowances and subsistence allowances can be reimbursed tax-free, without triggering additional payroll reporting. 

Choosing a reimbursement method: Per diem vs actual expenses 

When it comes to reimbursing travel and subsistence costs, there’s no universal best approach.

Most SMEs choose between two methods, or use a blend of both, depending on the situation. 

Option 1: Per diem (fixed daily allowance) 

What is a per diem?

A per diem is a set daily amount provided to employees to cover meals, incidentals, and sometimes accommodation while travelling.

It’s a straightforward way to manage costs and is often aligned with HMRC’s benchmark rates. 

Pros: 

• Simple & predictable: Employees know exactly how much they have to spend each day. 

• Low admin burden: When using HMRC’s scale rates, receipts aren’t needed for every small purchase. And with ExpenseIn, those allowances are applied and tracked automatically. 

• Tax-efficient: Payments can be made tax-free under HMRC’s simplified expense rules. 

Cons: 

• May not reflect actual spend: If the allowance is too low, employees could be out of pocket. If too high, they may pocket the difference (not taxable if under HMRC limits). 

• Less visibility on true costs: Finance teams lose granular insight into what employees actually spend. 

• Risk of non-compliance: Paying above HMRC-approved rates without proper documentation could create taxable benefits. 

Option 2: Expense reimbursement (actual costs) 

What is the actual cost model?

The actual cost model reimburses employees based on receipts (or e-receipts) and proof of spend.

It offers a high level of accuracy and fairness, especially for longer or more complex trips. 

Pros: 

• Precision & fairness: Employees are reimbursed exactly what they spend – no more, no less. 

• Greater control: Finance teams get a clear view of where money is going and can analyse trends. 

• Ideal for high-variance trips: Better suited for travel where costs fluctuate or are unpredictable. 

Cons: 

• Time-consuming: Collecting, submitting, and reviewing receipts takes effort. 

• Admin-heavy: Without automation, it’s easy to get bogged down in spreadsheets and paper trails. 

• Delayed reimbursement: If processing is slow, employees may have to cover costs out of pocket for longer than they’d like. 

Which Should You Choose? 

The best method depends on your business needs: 

• For regular, low-cost travel: Per diems can be faster and easier to manage. 

• For high-cost or international travel: Actual reimbursement provides fairness and detailed oversight. 

• For hybrid teams or growing SMEs: A mixed model (per diem for meals, receipts for hotels and transport) often works best. 

Benefits of automating travel & subsistence expense management 

Manually managing S&T expenses – through spreadsheets, email chains, and mountains of paper receipts – might work for a while. But as your business grows, the time, effort, and risk of errors can quickly spiral. 

Here’s how finance automation helps teams gain control, save time, and stay compliant: 

1. Saves time and reduces errors 

Instead of employees manually filling in forms or attaching receipts to emails, automation lets them: 

• Snap a photo of a receipt using a mobile expenses app 

• Automatically capture the key details (like amount, date, and vendor) with OCR (optical character recognition) 

• Submit everything in seconds – even during the trip 

For finance teams, this means fewer manual checks, fewer errors, and faster approval workflows.

It also eliminates the all-too-familiar task of decoding crumpled receipts or following up on missing info. 

2. Keeps claims within policy automatically 

With automation, your company’s travel and subsistence policy can be built into the system itself.

That means: 

• Daily meal limits, mileage rates, and excluded expenses are enforced automatically 

• Claims that fall outside the rules are flagged or blocked before submission 

• Employees are guided to stay within HMRC and internal policy limits, reducing back-and-forth and risk 

If HMRC updates its approved rates, those changes can be applied directly in the system, helping your team avoid accidental overpayments or taxable benefits. 

3. Accurate mileage tracking 

Mileage allowances can be tricky to manage manually. Employees may estimate their journeys, forget to log details, or submit vague claims. 

Business travel solutions (like those in ExpenseIn) can calculate mileage using GPS or address lookup, ensuring: 

• Every mile driven is tracked accurately 

• Employees are fairly reimbursed 

• No more guesswork or odometer reading photos 

It’s a simple way to bring fairness, consistency, and transparency to business mileage claims. 

4. Built-in carbon reporting for sustainable businesses 

As sustainability becomes a board-level priority, more businesses are tracking the carbon footprint of employee travel. 

With automation, each travel claim can include a calculated CO₂ emission, whether it’s a car journey, train ride, or flight, using UK government conversion factors. 

This allows finance teams to: 

• Track emissions by team, department, or trip type 

• Include environmental impact in reporting 

• Identify opportunities to reduce travel-related emissions 

It's especially useful if your company has ESG goals or plans to publish sustainability data. 

5. Real-time visibility & reporting 

One of the biggest advantages of a digital S&T process is real-time visibility. Instead of waiting until month-end, you can instantly see: 

• How much has been spent on travel and subsistence this week, month, or quarter 

• Who is spending what, and on which trips 

• Which areas are over or under budget 

This makes it easier to spot anomalies early, improve financial forecasting, and make smarter decisions, whether you're refining your travel policy or reallocating budgets. 

You’ll also have cleaner records for HMRC audits and easier export options for HMRC reporting. 

6. Improves the employee experience 

From the employee’s point of view, automation makes a huge difference. 

Instead of holding onto receipts and waiting weeks for reimbursement, they can: 

• Submit expenses on the go, from their phone 

• Get approval quickly (often before the trip ends) 

• Be reimbursed in the next payroll cycle, or even sooner 

This removes unnecessary friction from the process and helps employees feel supported while they’re on the road. 

How ExpenseIn Supports Smarter Travel & Subsistence Management 

For finance teams, managing travel and subsistence expenses isn’t just about ticking boxes – it’s about staying compliant, avoiding delays, and keeping employees on the road supported and reimbursed. 

ExpenseIn is designed with those realities in mind. It brings together everything from receipt scanning to automated mileage tracking and carbon emissions reporting in a single platform. 

Here’s how that plays out in practice: 

• A team member logs a mileage claim – ExpenseIn calculates the exact reimbursement at HMRC-approved rates, estimates the CO₂ impact, and flags anything that exceeds policy. 

• The finance team gets a clean, complete claim ready for approval – no chasing missing receipts or cross-checking spreadsheets. 

• Policy updates (like HMRC rate changes) are applied system-wide, reducing risk and admin overnight. 

It’s a straightforward way to reduce manual workload, improve accuracy, and keep everything compliant by default, not by exception. 

FAQ: Travel & Subsistence Expenses in UK SMEs 

Below, we answer some common questions finance professionals ask about travel allowances, subsistence, and managing these expenses in UK businesses: 

Are travel allowances taxable in the UK? 

No, provided they: 

• Are for business purposes (not commuting) 

• Stay within HMRC’s approved limits 

• Follow company policy and are well-documented 

What is an S&T allowance? 

S&T stands for subsistence and travel, covering the total cost of business trips, including meals, lodging, and transport. 

Should we use a per diem or reimburse actual costs? 

There’s no “best” – choose what fits your team. Many SMEs reimburse travel tickets/hotels and use a daily allowance for meals to reduce admin. 

What’s included in “travel and subsistence” expenses? 

Travel and subsistence expenses cover all the typical costs an employee might incur while travelling for business.

This usually includes: 

• Transport/travel costs 

• Accommodation 

• Meals and drinks (subsistence) 

• Incidental travel costs 

A Better Way to Manage Travel & Subsistence 

Understanding the meaning of a travelling allowance and how it fits alongside subsistence expenses helps your business stay compliant, support employees on the road, and avoid unnecessary tax liabilities. 

Expense management tools like ExpenseIn make it easy to implement and automate a compliant travel and subsistence allowance policy. From digital receipt capture to automated mileage and carbon reporting, it's everything you need in one place. 

Want to see how it works? Book a demo with ExpenseIn today and streamline your business travel expense process.