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Can you claim tax relief if you pay to upgrade your flight on a business trip?

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Reader Mario sent me a link to an interesting discussion on the website.

It is often possible to pay an additional sum at the airport to upgrade your flight.  Some airlines even have cards on the check-in desks with a price list.

British Airways also occasionally offers upgrades via ‘Manage My Booking’ in advance of travel.  It is also trialling a feature to have upgrade offers pop up on your mobile phone once you have already checked in and are in the departure area.

These deals can be good value, especially if you qualify for additional miles or tier points from the higher class.  (Not all airlines allow this, so be careful if it is offered.)

If your company policy is that a certain flight must be in Economy, and you personally pay a few hundred pounds to upgrade to Premium Economy or Business Class, you clearly can’t hand in your receipt to your employer and ask for the money back.

But …. can you ask the Inland Revenue, via your self assessment tax return, for tax relief on the money you spent?

Claiming tax relief on airport upgrades

This would be a chunky sum, as most people who travel for work will be in the 40% tax bracket.

Looking at the article, the answer is ‘Yes’.

(To read the article in full, you have to cut and paste a few words from the article into Google and then click back through.  This will show the full article rather the extract you see if you follow my link.)

The logic behind the decision seems clear:

HMRC is happy to reimburse premium cabin travel – there is no rule saying that only economy tickets are tax deductible

You are incurring an allowable business expense ‘wholly’ in the course of undertaking your employment, which means you can claim tax relief on it

The cost would go into Box 17 on the ‘Employment’ section of your self-assessment return.

Here’s a rough example of how this could work out

Imagine that you are flying to New York on a heavily discount British Airways Economy ticket for work.  At check-in you are offered an upgrade to Premium Economy for £300 one-way.  You are a 40% taxpayer.

Additional Avios earned (3458 – 865):  2,593 Avios

Additional tier points earned (90 – 20):  70 tier points

Net cost to you after tax relief:  £180

Given that you would get seven hours in the far better World Traveller Plus seat, plus a chunk of extra Avios, plus a chunk of extra tier points (most people consider £2 per tier point a fair price), you are coming out of this OK.

The only downside is that you have to pay the £300 now and won’t get the benefit of the tax relief for a year or more.  On the other hand, you’ll earn full miles on the £300 credit card spend whilst the tax relief will arrive via an adjustment to your tax code!

Can you get tax relief if you use Avios to upgrade?

We are now talking outside of the remit of the article I am discussing, and these are only my personal thoughts.

Air miles are generally treated as having no value for tax purposes.  You are not taxed when you receive them.  Using that logic, you should not be able to claim tax relief for the value of Avios you use to upgrade a work flight.

The Avios terms and conditions also make it clear that your points are actually the property of Avios Group and have only a nominal legal value.  This would also count against being able to claim they have a value for tax relief.

However, if you went to and bought some Avios which you used to upgrade your flight, I think you would have a better case for claiming tax relief on that payment.  At the end of the day, HMRC does not ask to see receipts for the tax relief you are claiming so it would only come up for discussion if they chose to investigate your return.

Clearly you shouldn’t take tax advice from me though …..

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  1. Don’t forget that in Scotland we have different tax banks from the remainder of UK, so tax relief at 41%? Apparently its progressive.

  2. I’m guessing everyone else on this thread is an accountant. I’m filing this article as niche.

  3. Premier01 says:

    Would this work for standard to 1st class rail upgrades? I book business rail travel through online corporate travel agent, however only certain journeys are allowed in first class.

    I usually upgrade the standard tickets from my own pocket and tax relief on this amount would probably be worth filling a form in for… don’t do SA usually.

  4. What about paying Ambassador to get Intercontinental upgrade on a business trip?

    • Yes if you use AMB purely for business trips. I think Rob does that. You may be asked to prove that it wasn’t used for private stays. Accountants on here will clarify this.

      • Do IHG hotels recognise status and/or Ambassador on big corporate group bookings? I am joining one of these soon.

      • I don’t actually write it off against HFP tax bills but it’s not a bad idea 🙂 I could just pro-rata my HFP-related IC stays (none this year, to be fair) and charge that amount.

      • Genghis says:

        An employee certainly couldn’t claim for AMB. For ltd co / sole trader, don’t see why not if “wholly and exclusively”.

  5. Premier01 says:

    Where would HMRC draw the line? Is there a difference between claiming tax back on a WT to WT+ upgrade and claiming tax back on a £ 90 Club Room supplememt at an Intercontinental?

    What if you had a rubbish expenses policy that allows £ 15 per meal? Could you buy a £ 40 steak dinner, claim tax back effectively halving the supplement you paid?

    Seems too easy!

    • Not sure if there are separate rules on subsistence? Certainly no problem upgrading your room because – and this is the key thing – HMRC would have allowed your employer to deduct the full cost if they booked you a club room anyway.

      • Genghis says:

        I’m surprised you’re being so bold in your statements which are based on some discussion online – albeit on a specialist website – which itself uses as the basis for argument a simple rail example from the handbook. Would the upgraded room be considered lavish? I certainly wouldn’t be saying yes or no to any of this but would want advice from someone more qualified on tax than either of us.

        • There is no HMRC definition of lavish. In my banking days we had a £300 per night hotel allowance (so £400 per night today) which no-one blinked at.

          In any event, this is the reality of HMRC:

          * you charge it anyway
          * 98% chance it does not raise any questions
          * 2% chance they look at it, of which a good chance they say it is OK, otherwise you agree to disagree and they ask you to pay the tax you would have had to pay in the first place (no penalty except standard interest)

        • Genghis says:

          But there’s a difference between what employees can claim as an expense and what those in trade (sole traders / incorporated entities) can claim due to the “necessary” test. Your £400 a night hotel allowance was paid by your bank (an incorporated entity), not you as an employee. Of course people should take proper advice, not rely on what is written on a blog.

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