Last updated: 16 October 2026
Can a company deduct taxi fares, and are employees taxed on them?
A company can usually deduct the cost of taxis it pays for, but whether the employee is taxed depends on the journey. Taxis for business journeys, such as travelling between client sites, are tax-free. Taxis for ordinary commuting between home and the usual workplace are a taxable benefit, unless an exemption applies. The main exemption covers occasional late-night journeys home after working later than usual, and journeys home when public transport is disrupted by industrial action.
Business or private?
| Journey | Taxable for employee? |
| Office to client meeting | No |
| Home to temporary workplace | No |
| Home to normal office | Yes |
| Late-night home after working late (occasional) | No, if conditions met |
| Home during a rail strike | No |
| Home after a works party | Yes, unless part of the party cost under £150 |
Late-night taxi conditions
- The employee works later than usual, until at least 9pm
- This happens irregularly, not as a regular pattern
- Public transport isn’t available or it isn’t reasonable to expect them to use it
- Shift workers on regular late patterns don’t qualify
There’s no longer a limit of 60 journeys a year, but the irregular test still applies.
Reporting taxable taxis
If a taxi isn’t exempt, report the cost on the employee’s P11D or payroll it. If the company pays the taxi firm directly, Class 1A NIC applies. If the employee pays and is reimbursed, it’s treated as earnings through payroll with Class 1 NIC.
Example
An accountancy firm’s staff work until 11pm during the January deadline peak, which happens only that month. The firm pays taxis home, which are exempt. A manager who regularly finishes at 10pm and takes a taxi home every night is taxed on the cost, as the late working is regular.
Directors
The same rules apply to directors. A director taking taxis to and from their usual office is taxed on them, even if the company pays.
VAT
Taxi fares from VAT-registered firms include VAT, which you can reclaim on business journeys with a VAT receipt. Many taxi drivers aren’t VAT registered, so there’s no VAT to claim.
Common mistakes
- Treating all taxis as business costs
- Applying the late-night exemption to regular working patterns
- Not keeping receipts and journey reasons
- Forgetting to report benefits
Records to keep
Keep receipts, journey details and the business reason for each taxi.
Taxis for safety reasons
Some employers pay for taxis because staff feel unsafe travelling late. Unless the late-night conditions are met, this is still taxable. Employers can pay the tax through a PAYE Settlement Agreement so employees don’t lose out, which keeps the policy simple and avoids individual reporting.
Frequently asked questions
Are ride-share apps treated the same?
Yes.
Can disabled employees get tax-free taxis?
Yes, for home-to-work travel in some cases.
Is a taxi to the airport for a business trip taxable?
No, it’s business travel.
Can I claim taxis as a sole trader?
Yes, for business journeys only.
Travel policy
A written travel policy helps staff know which taxis the company will pay for and keeps records consistent.
Related: what travel expenses you can claim, travel class and hotel standards and commuting costs.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with employee travel expenses advice. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
