Quick answer
Accommodation you need because business has taken you away from home overnight is an allowable expense, and the 20% VAT on UK hotel stays is reclaimable with a valid invoice. Your employer can also pay £5 per night in the UK (£10 overseas) tax-free for incidentals such as calls and laundry. The stay must be for genuine business, and the same 24-month temporary-workplace rule that governs travel applies.
Is business accommodation tax deductible in the UK?
Yes, where the overnight stay is a necessary result of business travel. If a project, client meeting, or temporary posting requires you to stay away from home, the reasonable cost of a hotel or other accommodation is deductible, and it follows the same logic as business travel. The accommodation must relate to travel to a temporary workplace; once the 24-month rule turns that workplace permanent, the accommodation becomes ordinary private living cost and stops being deductible.
Unlike most travel fares, UK accommodation is standard-rated for VAT at 20%, so a business hotel stay is one of the few travel costs where there is input VAT to reclaim. Meals charged to the room follow the subsistence rules rather than the accommodation rules.
How much can you claim?
You claim the actual, reasonable cost of the room. There is no fixed nightly cap, but HMRC expects the cost to be appropriate to the business purpose rather than lavish. On top of the room cost, the incidental overnight expenses rules let an employer reimburse a flat amount tax-free for the small personal costs of being away:
| Location | Tax-free incidental allowance |
|---|---|
| Stays within the UK | £5 per night |
| Stays outside the UK | £10 per night |
This is an exemption, not an allowance you can simply pocket: if reimbursed incidentals exceed the limit, the entire amount becomes taxable, not just the excess.
Worked example. An engineer stays three nights in Manchester for a temporary project. The hotel is £110 per night including £18.33 VAT, totalling £330 with £55 of reclaimable VAT. Her employer also pays £5 per night, £15, tax-free for incidentals. The £330 room cost is deductible, the £55 VAT is reclaimable, and the £15 incidental payment is tax-free because it stays within the £5 nightly limit.
Record-keeping requirements
Keep the VAT invoice from the hotel, not just the card receipt, because you need a valid VAT invoice to reclaim the 20%. Record the business purpose and the dates of the stay. Where incidentals are reimbursed, keep evidence that the £5 or £10 nightly limit was respected. Retain accommodation records for six years for VAT and for the year-end retention period for income or corporation tax.
How to claim, step by step
- Confirm the stay results from travel to a temporary workplace, not a permanent one.
- Obtain a full VAT invoice from the accommodation provider, not just a card slip.
- Code the room cost to travel or accommodation and reclaim the 20% input VAT.
- Split out any meals charged to the room and treat them under the subsistence rules.
- Reimburse incidentals within the £5 (UK) or £10 (overseas) nightly limit to keep them tax-free.
- Employees claim relief through Self Assessment or form P87; the self-employed deduct it in the trading accounts.
Common mistakes
- Keeping only the card receipt, which is not a valid VAT invoice and blocks the 20% reclaim.
- Treating accommodation near a long-running site as deductible after the 24-month rule has made the workplace permanent.
- Breaching the £5 or £10 incidental limit, which makes the whole reimbursement taxable.
- Claiming the private portion of a trip extended for a holiday.
- Lumping room-service meals into the accommodation cost instead of applying the subsistence rules.
Software that helps
Hotel folios bury the VAT, the room cost, and the meals on one document, so the value is in splitting them correctly at capture.
- TravelPerk itemises booked stays and separates accommodation from extras automatically.
- ExpenseFlow reads the hotel folio, separates the room cost from the meals and incidentals, applies the standard-rate VAT treatment to each line, and syncs the coded stay to Xero or QuickBooks.
- Expensify matches the hotel card transaction to the uploaded folio for faster reconciliation.
FAQ
See the answered questions above for deductibility, the £5 incidental allowance, reclaiming hotel VAT, staying with family, and longer-term lets near a temporary workplace.