Umbrella Company Expenses - What can You Claim?

Contractors spend ages trying to figure out umbrella company expenses because all they really care about is: how does umbrella expenses affect their take home pay? Umbrella companies love to hype up expenses when they’re trying to win you over, but the details? Those are often hidden away, leaving everyone confused about what’s allowed, what gets taxed, and whether claiming expenses even makes a difference to your pay anymore.

A lot of this confusion kicked off when HMRC changed the rules in April 2016. In the past, umbrella workers could claim all sorts of expenses for travel and meals. But after HMRC tightened things up and started treating most umbrella contractors as employees, most of those benefits disappeared. Travel to your usual workplace, grabbing lunch on the job, hotel stays aren’t tax-free for most umbrella workers anymore.

This article gets straight to the point. You’ll find out exactly how umbrella company expenses work right now in 2026, which costs are usually not allowed, and the rare circumstances where you can still make in a claim. By the end, you’ll finally understand how expenses actually affect your take-home pay and what you should watch out for before choosing an umbrella company.

Umbrella company expenses are simply the work-related costs you can claim while carrying out your job through an umbrella company. Think of things like train fares to visit a client or payments for professional memberships. These aren’t bonuses or extra money, they’re just the costs you need to cover to do your job.

Once you’ve joined an umbrella company, you’re officially their employee. The umbrella company manages the contract with your client or agency and pays your wages through PAYE. Any expenses you want to claim have to go through them too, usually using an online form or portal. If your expenses meet HMRC’s requirements and the umbrella company’s own policies, they’ll process them together with your pay.

Reimbursed Expenses vs Tax Relief

One thing that often confuses people is the difference between reimbursed expenses and tax relief.

If the umbrella company reimburses you, they’re basically paying you back for what you’ve already spent. But this usually goes through payroll, so it can still be taxed.

Tax relief, on the other hand, just means you pay less income tax, not that you receive extra cash in your pocket. Due to changes in HMRC rules, most umbrella company employees don’t get tax relief on common expenses anymore. That means, for most umbrella workers, claiming expenses doesn’t actually boost their take-home pay these days.

Current HMRC Rules on Umbrella Company Expenses

Currently, HMRC checks if a contractor works under supervision, direction, or control, often called SDC. They want to see if someone else decides how, when, or where you do your work. If that applies, HMRC treats you as working under SDC.

Nearly everyone working through an umbrella company falls into the SDC. For tax purposes, HMRC treats these workers like regular employees. The days of contractors enjoying flexible expense rules are over. Now, the usual employee expense rules apply.

Most of the expenses umbrella workers used to claim previously are not allowed anymore. You can’t claim travel from home to your main workplace, lunch during your shift, or hotel stays near your client’s office. What HMRC does allow is limited. For example:

• business travel between different client sites
• mileage for genuine work journeys
• professional subscriptions to HMRC approved organisations
• uniforms or protective clothing needed for the job

Knowing what’s allowed matters. It helps contractors avoid unexpected tax bills and ensures everyone stays compliant.

Expenses You Usually Cannot Claim Through an Umbrella Company

• Travel from home to your main workplace
  This counts as normal commuting, even for short term contracts, so it is not claimable.
• Daily commuting costs
  Train fares, fuel, parking, tolls, and similar costs for getting to work are treated as personal expenses.
• Meals and subsistence
  Lunches, snacks, coffees, and meals bought during the working day do not qualify as business expenses.
• Accommodation for standard assignments
  Hotel stays or rented rooms near the client site are usually seen as personal living costs.
• Home office costs in most cases
  Working from home does not automatically allow claims for rent, utilities, or broadband under an umbrella company.

Umbrella Expenses You May Still Be Able to Claim

While most everyday expenses can’t be claimed anymore, umbrella company workers may still be able to claim certain expenses. It usually comes down to three main categories, depending on who pays them and how they relate to your work.

Client Billable Expenses

If your end client or agency has agreed up front to pay, they’ll cover the cost. The umbrella company just passes the payment on to you. This includes:

• Travel or accommodation agreed in the contract
• Project-specific costs approved in advance

Just keep in mind, these don’t reduce your tax bill; they’re just paid because your client agreed to pay them.

Business Costs Required for Your Role

These are the expenses you need to carry out your work. If they meet HMRC rules, your umbrella company could reimburse you. Typical examples include:

• Mileage for business journeys between sites or meetings
• Parking fees for work-related travel
• Professional materials such as textbooks or manuals
• Computer software or tools needed for the role
• Protective clothing or safety equipment
• Training linked directly to your current job

If approved, you usually get these paid back without any tax or National Insurance being deducted.

Non-client Billable Business Expenses

Then there are expenses your client or agency won’t cover, but you might still be able to claim if they qualify as allowable expenses under HMRC rules. To qualify, the cost must be incurred wholly, exclusively, and necessarily for your work.

Common examples include:

• Mileage for approved business journeys
• Professional subscriptions
• Protective clothing
• Stationery, postage, phone and internet
• Business entertainment

Each umbrella company applies its own policy, so they’ll check your claims before approving them. Understanding these categories helps you avoid problems like rejected claims or unexpected deductions.

Introduced in April 2016, the SDC legislation was implemented to level the playing field between permanent employees and contractors or freelancers in relation to travel and subsistence expense rules.

Agency Legislation focuses on "Supervision, Direction, or Control" to determine whether a worker is considered an employee or self-employed. This means that if an employer supervises how, when, and where the work is done, gives specific directions on tasks, or maintains control over the worker's activities, then they are likely to be classified as an employee rather than self-employed. This distinction is important for tax and employment rights purposes.

If a contractor is deemed to be under SDC, he or she won’t be able to claim tax relief on home-to-work travel and subsistence expenses.

SDC is defined as:

• Supervision: Supervision means watching over someone while they work to make sure they're doing it right and up to the required standards. It can also involve helping them improve their skills.
• Direction: Direction is when someone tells another person how to do their work, giving them instructions or advice on the best way to do it. The person giving direction often organizes how the work is carried out.
• Control: Control is when someone decides what work a person does and how they do it. It also involves having the authority to assign them to different tasks.

If you’re subject to SDC, you won’t be able to claim home-to-work travel and subsistence expenses. Bear in mind that expenses incurred during an assignment, such as an occasional trip to a different workplace (detached duty travel) aren’t affected by the SDC legislation.

What are Travel and Subsistence Expenses?

Subsistence expenses refer to expenses for meals and other necessities incurred while an employee is away from a permanent workplace.

These include expenses for food and drinks, accommodation, business phone calls, parking charges, tolls, mileage and other costs of travelling.

Travel expenses are expenses incurred for:

• Travelling that is required for a contractor to perform his or her assignment
• Trips made to and from a workplace (excluding normal commuting)
• Trips made to and from a temporary workplace

Detached Duty or Inter-Site Travel:

Also known as mobile working, detached duty or inter-site travel refers to situations where you are required to work at different locations. If you usually work in one place but your client sends you to another location temporarily, HMRC might let you claim a tax deduction for the costs of traveling and living while you're there. You'll get the same tax benefits as a regular employee sent to a temporary workplace.

The type of expenses that you may be able to claim when travelling to a temporary worksite are:

• Mileage and associated costs (tolls, parking, etc.)
• Public transport (bus, train, taxi, air fares, etc.)
• Car hire and fuel costs
• Accommodation (hotels, B&Bs, rental properties and utilities, etc.)
• Meal expenses (evening meals, lunch, breakfast, etc.)

Make sure to keep detailed records to substantiate your claim

Are There Exceptions to the Rule?

The rule doesn’t apply if a worker’s services are provided wholly in the end client’s own home—such as when a contractor provides gardening or cleaning services in the home of a client.

And if you’re under SDC, but are a mobile worker, you’ll be able to claim mileage for travel from one appointment to another. A mobile worker refers to an individual who works in multiple locations, works away from their normal workplace or doesn’t have a fixed workplace.

What Expenses can I Claim for If I’m not Subject to SDC?

You’ll be able to claim for the client billable, business costs and non-client billable business expenses we’ve outlined above.

Additionally, each of your workplaces will be considered a temporary worksite. This means that you’ll be able to claim travel and subsistence expenses, provided that these are incurred wholly, exclusively and necessarily for the performance of your work.

Understanding umbrella company expenses is vital for any contractor navigating the UK's contracting landscape. While there are restrictions and considerations to keep in mind, the convenience, flexibility, and overall support offered by umbrella companies make them a compelling choice for many professionals. However, it's crucial to stay informed, especially in the ever-evolving world of taxation and employment regulations.

For personalized advice and seamless financial management, consider enlisting the services of contractor accountants. Their expertise in understanding the complexity of contractor finances can ensure you make the most of your contracting journey.

How do I determine my SDC status? 

Your SDC status will be assessedby your umbrella company before the start of each assignment. 

In general, your provider shouldhave a compliance team who will obtain information through a questionnaireabout various aspects of your assignment—such as the level of experienceneeded, the level of supervision required and the amount of information or advicethat will be provided. 

Your provider will thendetermine your SDC status, and provide recommendations about moving forwardwith the assignment. 

What’s the process for makingexpense claims?

Generally, you’ll be asked toupload expenses claims on a weekly or monthly basis, and your provider willreimburse client billable expenses and business costs. You may claim tax reliefon-client billable expenses via Self Assessment tax returnor the P87 form at the end of thetax year. 

Your umbrella company will havea process in place for handling expense claims. The process may vary acrossdifferent providers; some may provide assistance or complete the necessary taxforms on your behalf—so this is something you’ll want to clarify when you’respeaking with a prospective umbrella company. 

What are record keepingrequirements I need to know? 

Your umbrella company willrequire receipts or other evidencefor expenses claims, so you’ll need to keep full records of yourexpenses. 

Additionally, these recordsshould be kept for a minimum of six years,as you’ll need to show proof of your expenses in the event of an HMRCinvestigation.