Building a company expense policy: a guide for UK businesses

Understand the guiding principles of a sound expense policy
Find out what you should include, like what can and can’t be claimed
Learn the ‘dos’ and ‘don’ts’ of expenses and reimbursement

FormatPDF

Publication date23/12/2025

AuthorThe Payfit team

Give your team clearer rules for company expenses

A clear company expense policy helps employees understand what they can claim, how much they can spend and when they will be reimbursed. It also gives People, Finance and Operations a consistent process to follow.

Our practical expense policy guide shows you how to create or review your policy. You will find guidance on expense categories, spending limits, approvals, receipts and reimbursement workflows.

What is a company expense policy?

A company expense policy sets out the rules for spending and claiming costs incurred while carrying out work for the business. It should explain who can claim, which costs are covered, what evidence is needed and who approves each claim.

Your policy can cover employees, workers and contractors where appropriate. The right scope depends on how your business operates, the roles involved and the types of costs people incur.

A useful policy is clear enough for employees to follow without repeated questions. It should also be easy for the business to review when spending patterns, working arrangements or tax rules change.

What will you find in the expense policy guide?

The guide gives you a practical framework for building an expense policy that fits your organisation. It covers:

the purpose and scope of a company expense policy;
principles for fair, consistent and easy-to-understand rules;
costs that may be claimed, such as travel, accommodation, meals and home-working equipment;
budget limits and category allowances;
approval routes and responsibilities;
receipt and record-keeping expectations;
how and when to reimburse employees;
common policy mistakes and ways to review your process.

The guide also includes a section on how Payfit can support expense administration. A clear policy should distinguish allowable and disallowable expenses before setting category limits.

Decide what employees can claim

Start by listing the costs employees may incur while doing their work. Depending on your organisation, this might include business travel, overnight stays, food and drink, mileage or equipment for home working.

Then define what is not covered. Explain whether employees need approval before spending, whether limits apply by category and what happens when a claim falls outside the policy.

Tax treatment can vary by expense and circumstance. The reporting of payrolled benefits is one example of an area where the correct process depends on the circumstances. Your policy should not replace HMRC guidance or professional advice.

Set a consistent approval and reimbursement process

Employees should know how to submit a claim, what information to include and who reviews it. Managers and Finance teams should understand their own responsibilities, including how to handle incomplete or unusual claims. This can also help prevent common payroll mistakes caused by incomplete or late information.

Your policy should also state when approved expenses are paid. If you reimburse through payroll, explain the timing and how the expense appears in the process. If you use company cards, advances or another payment method, document the rules for each route.

Why review your expense policy?

An outdated policy creates uncertainty. Employees may receive inconsistent answers, managers may approve similar claims differently and Finance teams may spend time resolving avoidable queries.

A regular review helps you check whether your categories, limits and approval routes still reflect the way your business works. It also gives you an opportunity to make the policy shorter, clearer and easier to find.

A policy cannot remove every tax or fraud risk. It can, however, make expectations visible and create a more consistent record of decisions.

Frequently asked questions

How do you write an expense policy?

A travel expense policy explains how employees can pay for and claim costs linked to business travel. It commonly covers transport, mileage, accommodation, meals and client hospitality. If employees use company cars, explain the relevant company car tax rules in the policy. It should also explain approval, evidence and reimbursement.

What should an employee expense policy include?

It should include the policy scope, claimable and non-claimable costs, spending limits, approval steps, receipt requirements, reimbursement timing and the process for exceptions. It should also direct employees to current tax guidance where the treatment depends on the circumstances.

What is an example of a reimbursement policy?

A reimbursement policy might say that employees submit approved business expenses with receipts through a defined process, and that valid claims are paid within a stated period. The amount and timing should reflect your own budget, payroll calendar and payment process. The treatment of payrolled benefits may also affect the reporting route.

Who approves CEO expenses?

There is no single approval route for every business. A company should define an independent and appropriate process in its governance documents. This may involve a board, chair, Finance lead or another authorised approver, depending on the organisation.

How do employers report expenses and benefits to HMRC?

The correct process depends on whether the expense or benefit is taxable and on the reporting method used by the employer. HMRC guidance covers payrolling, P11D reporting and National Insurance requirements. Our guide to payrolling benefits explains one route, but employers should check the current HMRC rules for their circumstances.