HMRC is reviewing its Benchmark Scale Rates and Overseas Scale Rates, flat-rate allowances for employee expense reimbursement. This review signals potential changes to how accountants advise clients on travel and subsistence claims.
HMRC is reviewing its Benchmark Scale Rates (BSRs) and Overseas Scale Rates (OSRs), flat-rate allowances that allow employers to reimburse employees for meals, accommodation and travel expenses without checking every receipt.
This quiet but consequential initiative, signalled in HMRC's August 2026 update, deserves close attention from accountants advising clients on employment expenses and payroll practices.
The Current System
For decades, BSRs and OSRs have simplified tax-efficient expense management. They permit employers to pay fixed daily allowances for subsistence costs when employees work away from their regular workplace—typically for meal, hotel and incidental expenses on UK and overseas travel respectively. Because the allowances are prescribed by HMRC, employers need not audit every receipt. This saves administrative burden and reduces employee grievance. For tax purposes, amounts up to the BSR threshold are treated as not taxable to the employee (within conditions), and the employer obtains a corresponding deduction.
The current standard UK BSR is £5 per night for food and drink, with separate allowances for accommodation and overnight travel depending on location. These rates have remained largely static, even as inflation and actual living costs have risen substantially since their last meaningful review.
Why the Review Matters Now
The review will consider whether the current rates still reflect actual costs and whether the system can be simplified. That language signals two directions of change. First, there is acknowledgement within HMRC that the real cost of meals, hotels and travel has outpaced the published flat-rate allowances. Many employees and employers have questioned whether £5 a night for subsistence in London, or £10 in certain overseas cities, remains realistic. A downward gap between the allowance and actual cost can incentivise informal top-ups or undisclosed reimbursements that blur the tax boundary.
Second, HMRC's interest in simplification hints at regulatory streamlining. The current rules are scattered across multiple notices and guidance documents. A modernised framework could reduce compliance friction and align the regime with contemporary working patterns—such as hybrid arrangements, international secondments, and remote-work assignments that did not exist when the current rules were drafted.
Practical Implications for Accountants
For accountancy practices, this review carries several implications:
Client advisory work. If your clients employ staff who travel regularly—delivery drivers, consultants, field service engineers, or staff on temporary assignment—the BSR review may affect how you structure their expense policies. Practices should prepare to advise clients on transitional implications if HMRC increases the allowances or reshapes the categories.
Compliance confidence. A formal review also signals that HMRC is paying attention to this area. Accountants should ensure that clients claiming BSRs are genuinely complying with the underlying conditions: that amounts are genuinely paid as allowances, not arbitrary "top-ups", and that reimbursements are properly documented in payroll records.
Timing. For businesses with employees who travel regularly, any simplification could reduce administration and make expense claims more straightforward. However, the review process itself will take time. Do not expect revised rates or rules before early 2027 at the earliest.
What to Watch
Accountants should monitor HMRC's Tax Compliance & Taxpayer Clearance guidance and the Agent Updates (published monthly) for the outcome of this review. Once the review concludes, HMRC will likely consult on proposed changes before any legislative amendment. The Finance Bill passage window is typically autumn 2026, so revised BSRs could theoretically take effect from April 2027 onwards if prioritised.
For now, continue applying current rates, document compliance carefully, and remind clients that the landscape is under review. This is not a crisis; it is a timely realignment of a long-standing rule to modern economic reality.