Employee expenses: £2,500 threshold and subsistence rates

Two Budget 2026 measures change how employees get tax relief for work costs, both from April 2028. Employees with large unreimbursed expenses will no longer have to file a Self Assessment return to claim them, and the benchmark rates employers use to pay subsistence without checking receipts are being modernised. For practices, the first change may remove a group of returns, and the second will mean updating expenses policies.

The £2,500 Self Assessment threshold goes

At present, an employee who wants tax relief on employment expenses their employer does not reimburse, such as professional subscriptions, tools or business mileage paid at less than the approved rate, can claim through PAYE only if the total is £2,500 or less. Above that, they must claim through Self Assessment.

The Treasury’s overview of tax legislation says the government will remove the £2,500 Income Tax Self Assessment expenses threshold from April 2028. The Budget document dates it from 6 April 2028 and says it will:

• let more taxpayers claim relief on non-reimbursed employment expenses through PAYE
• remove the need to enter Self Assessment solely to claim employment expenses
• ensure more claims are subject to evidence before relief is given

The government will keep under review whether to make the PAYE route compulsory for people claiming only employment expenses. The Budget document says around 160,000 employees will find it easier to claim. The Treasury’s costing shows a cost of £85 million in 2028-29 and a gain of £70 million in 2029-30.

New benchmark subsistence rates

Benchmark scale rates let employers pay employees a set amount for meals on qualifying business journeys without checking receipts. HMRC’s manual shows rates starting at £5 for qualifying travel of five hours and £10 for ten hours.

From 6 April 2028 the rates will be:

Overseas scale rates, which currently list more than 200 destinations individually, will be replaced with a simplified tiered approach linked to the updated benchmark rates. HMRC will work with stakeholders on the rate for each destination and the guidance before publication, and the changes will be made by secondary legislation before April 2028.

Mileage rates

The Budget also confirms the mileage rate for cars and vans at 55p for the first 10,000 business miles, with the rate above 10,000 miles rising from 25p to 35p from 6 April 2027. See mileage rates after Budget 2026.

What it means for accountants and their clients

Some employee returns may disappear. Clients who file only to claim large employment expenses, often professionals with high subscriptions or employees with heavy unreimbursed travel, may not need a return from 2028-29. Check for other reasons to file before closing a record.

Evidence will matter more. The government’s stated aim is that more claims are checked before relief is given. Encourage clients to keep receipts, mileage logs and employer confirmations of what was and was not reimbursed.

Update expenses policies for 2028. Employers using benchmark scale rates will be able to pay considerably more tax-free, and those with overseas travel will need to move to the new tiered rates. Employers who have agreed bespoke rates with HMRC should review whether they are still needed.

Watch for the overseas rate tables. International employers and their payroll providers should look for HMRC’s destination-by-destination rates, which have not yet been published.

For background, see our guides to a staff expenses policy, benefits in kind and P11D and who needs to file a tax return.

Frequently asked questions

When is the £2,500 employment expenses threshold being removed?

From 6 April 2028. After that, employees will be able to claim relief on non-reimbursed employment expenses through PAYE whatever the amount, rather than having to file a Self Assessment return.

Will employees have to provide evidence for expenses claims?

The government says the change will ensure more claims are subject to evidence before relief is given, so employees should keep receipts and records of what their employer did not reimburse.

What are the new benchmark scale rates?

From April 2028: £20 for qualifying travel over 5 hours, £60 over 10 hours and £75 over 24 hours.

Are overseas scale rates changing?

Yes. More than 200 destination-specific overseas scale rates will be replaced with a simplified tiered approach linked to the new benchmark rates, from April 2028.