Expense Reimbursement Best Practices for UK Businesses

Employee expenses are a normal part of running a business, but the process can quickly become messy without clear rules. Whether your team travels regularly, spends abroad or occasionally buys office supplies, managing expense reimbursement well saves time, reduces errors and helps you stay on top of your finances.

This guide covers what expense reimbursement is, how the process works, what to include in a policy, what UK employers need to know around HMRC reporting and record keeping, and how to compare reimbursement with using business expense cards.

If your team regularly spends abroad or in multiple currencies, Wise Business expense cards can help you control employee spending upfront and reduce the need for manual reimbursements.

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What is expense reimbursement?

Expense reimbursement is the process where a business pays back employees for approved work-related expenses they've paid out of their own pocket.

For example, one of your team may book a hotel for an upcoming conference, take an important client out to lunch or fill a company car with fuel.

If they pay for the purchase and it's covered under your company's expense policy, they're eligible for reimbursement. They'll need to submit an expense report and receipts, which will then be reviewed and approved (unless there are errors or discrepancies), and the expenses reimbursed to their personal bank account.

A common question is whether all work-related costs automatically qualify. The answer is no. What can be reimbursed depends on your company policy, so it is worth defining this clearly so employees know what they can and cannot claim.

Examples of reimbursable expenses

Reimbursable expenses tend to be any approved work-related purchase an employee pays out of their own money. The table below shows common categories and examples:

Every business should define what is and is not reimbursable in its own policy. Travel alone can generate a large volume of expense claims, particularly for employees who travel internationally. If your team regularly travels for work, Wise Business expense cards can help reduce the number of manual reimbursement claims by letting employees spend directly from a company card.

What usually cannot be reimbursed?

Not all work-related costs automatically qualify for reimbursement. The following are commonly excluded:

• Normal commuting costs (the journey between home and a permanent workplace)
• Personal meals not connected to business travel or a client meeting
• Personal purchases that are not related to work
• Expenses without receipts or supporting evidence
• Purchases that exceed company spending limits or were not pre-approved

This list is not exhaustive. Every business should set out non-reimbursable expenses clearly in its policy to avoid confusion and disputed claims.

How does the expense reimbursement process work?

Here is how the expense reimbursement process works in a typical UK business:

1. The employee pays for an approved business expense, such as a train ticket, hotel or office supplies.
2. The employee keeps the receipt or invoice as evidence.
3. The employee submits an expense claim or expense report, usually at the end of the reporting period or within a set deadline.
4. The manager or finance team reviews the claim against the company's expense policy.
5. The claim is approved, or queried if there are errors or missing information.
6. The business reimburses the employee, usually by direct bank transfer or through payroll.
7. The finance team records the expense for accounting and tax purposes.

To avoid the risk of human error and to save time, many businesses use automation tools and software to manage expense reporting and reimbursement. Some businesses also use employee expense cards to reduce the number of manual claims altogether. You can find options in our guide to the best accounting software for UK businesses.

Expense reimbursement best practices for businesses

A good expense management process reduces admin, protects company funds and ensures employees are paid back fairly and on time. Here are the key best practices to follow.

Create a clear expense reimbursement policy

A written expense reimbursement policy is the foundation of good expense management. It tells employees exactly what they can claim, what evidence they need to provide and how the process works. Acas advises that it is good practice to get arrangements about repaying work-related costs in writing, and that long-term arrangements should have a formal expenses policy.^¹

Your policy should cover: what employees can and cannot claim, spending limits by category, required receipts or other evidence, the approval process, claim submission deadlines, reimbursement timelines, rules for travel, mileage and international spending, and what happens if information is missing or incorrect.

Set realistic spending limits

Spending limits help control costs and reduce confusion about what is acceptable. Without them, employees may spend significantly more or less than the business intends, which can lead to disputed claims. Consider setting separate limits by category, such as a maximum nightly hotel rate, a per-person meal allowance for client meetings, a cap on taxi fares or a threshold for software subscriptions.

Make receipt collection simple

Receipt collection is one of the most common pain points in expense management. If employees find it difficult to submit evidence, claims get delayed or lost. Digital tools, mobile apps and accounting integrations can make submission far easier. One thing worth knowing is that employees can upload receipts directly after paying with Wise Business expense cards, which connect to accounting tools such as Xero, QuickBooks and FreeAgent to simplify reconciliation.

Approve expenses quickly

Delays in approving claims can create real frustration, particularly for employees who have paid from their own pocket and are waiting to be reimbursed. Define clearly who is responsible for approving expenses, set a deadline for approvals and use automated reminders to keep the process moving. The key question is whether your employees would be comfortable covering a cost for several weeks while waiting. If not, your approval timeline may need tightening.

Review expense data regularly

Reviewing expense patterns on a regular basis helps you spot overspending, identify unclear areas in your policy and flag unusual claims. It can also reveal whether certain expense categories, such as frequent travel reimbursements, might be better handled through employee expense cards rather than manual claims.

Expense reimbursement policy: what should it include?

A good expense reimbursement policy does not need to be lengthy, but it does need to be complete. Your policy should be clearly worded and communicated to all employees. Use the checklist below to make sure yours covers the essentials:

• Eligible and non-eligible expenses
• Spending limits by category
• Receipt and evidence requirements
• Approval workflow and named approvers
• Claim submission deadlines
• Payment timelines
• Mileage rules (including reference to HMRC-approved rates)
• Travel and accommodation rules
• Foreign currency expense rules
• Process for disputed or rejected claims
• Policy owner and review date

With the right policy and procedures in place, you can improve the efficiency of the whole process. This ensures employees get reimbursed more quickly, and it means less manual work for the finance team. A strong policy can also boost transparency and trust, so that employees can travel and make other business expenses in confidence. If you are unsure how to categorise company costs more broadly, our guide to operating expenses in the UK covers this in more detail.

UK rules employers should check for employee expenses

As a UK employer, there are important rules to be aware of around tax, National Insurance and HMRC reporting. This section provides a general overview. Businesses should check HMRC guidance directly or speak to a tax professional if they are unsure how to treat a specific expense.

If you provide expenses or benefits to employees or directors, you will usually need to report them to HMRC and pay tax and National Insurance on them, depending on the type of expense or benefit provided.²

Taxable expenses or benefits can be reported through payroll or online at the end of the tax year. If you payroll all expenses and benefits, you do not need to submit a P11D for each employee at the end of the year. However, you will still need to submit a P11D(b) to report any Class 1A National Insurance owed.³

Employers must keep a record of all expenses and benefits provided, including the date, details and any amounts employees contributed. HMRC requires these records to be kept for 3 years from the end of the tax year they relate to.⁴

For mileage, the HMRC-approved mileage rate for cars and vans in 2026/27 is 55p per mile for the first 10,000 business miles and 25p for each business mile over 10,000. If you pay employees more than the approved rate, the excess may need to be reported and taxed. If you pay less, employees may be able to claim Mileage Allowance Relief directly from HMRC.⁵

Employees should provide evidence for expenses, and employers should set out these requirements clearly in an expenses policy.¹ You can find more on this topic in our guide to whether expenses should be paid through payroll.

This section is for general information only. Businesses should check HMRC guidance or speak to a tax professional if they are unsure how to treat a specific expense.

Reimbursement vs employee expense cards

Expense reimbursement works well for occasional or low-volume expenses. It is a straightforward approach: the employee pays, submits a claim and gets paid back. However, it can create significant admin when employees travel frequently, spend in multiple currencies or need fast access to company funds.

The table below compares the two main approaches:

One thing to be clear on: using expense cards does not remove the need for a policy. Businesses still need spending rules, approval processes and record keeping, regardless of how employees pay. For a more detailed comparison, see our guide to the best business expense cards for UK businesses.

How Wise Business expense cards can help manage employee expenses

If your business operates internationally and your employees are regularly spending time abroad for work, Wise Business expense cards can help reduce the manual admin that comes with reimbursements.

Here is how it works. Once you have a Wise Business account, employees can order a business debit card for a one-off fee. You can pre-set individual spending limits and control access through team management. Employees spend directly using the card, and you can track all transactions in real time in one place.

When employees pay with their Wise Business card, they can upload receipts straight away. The account connects with accounting tools including Xero, QuickBooks and FreeAgent, which helps with bookkeeping and speeds up reconciliation.

These contactless business debit cards can be used to pay in 40+ currencies and in 150+ countries worldwide, with no foreign transaction charges. Whenever the card is used abroad, the currency is converted at the mid-market exchange rate, with just a small conversion fee to pay.

There is also 0.5% cashback on eligible spending, including on employee expense cards.

For businesses managing regular travel or international spending, this can reduce the back-and-forth of expense claims while keeping your team in control of what they need.

With Wise Business, you can:

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• 👥 Run payroll and make international payments for up to 1,000 employees all over the world - including paying suppliers using local payment methods like ACH, SEPA, and Faster Payments
• 💳 Get business debit cards with 0.5% cashback for you and your team to keep track of team expenses and spend all over the world, with real-time visibility and categorisation
• 🏢 Manage cash in 55+ currencies across international offices from a single business account and move money between business accounts in seconds (exact speeds can vary depending on individual circumstances and may not be the same for all transactions)
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• ⚙️ Automate payouts with the Wise API (comes with 24/7 customer support, a sandbox account to test integrations, API tokens, and clear documents on how to implement and make the most of our API)

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FAQs: Expense reimbursement

How do you reimburse employees for expenses?

There are two common ways employees are reimbursed for business-related expenses. The first is direct bank transfer upon submission of an approved expense report. The second is payment through the payroll system, where the employee receives reimbursement alongside their salary and the amount is shown separately on their payslip. The right approach depends on your business's size, the volume of claims and how your payroll and accounting processes work.

What expenses can employees claim back?

Employees can generally claim back approved, work-related costs they have paid for personally. Common examples include business travel such as train tickets, taxis and mileage, accommodation during work trips, client meals, office supplies and work-related training. What is claimable depends on your company's expense policy, so employees should always check this before spending.

What is the difference between payment and reimbursement?

Reimbursement is a term specifically used in relation to paying back, such as repaying an employee for a work-related cost they have covered personally. A payment is different, as it usually refers to the payment of a salary or the purchase of goods or services. The distinction matters for tax purposes: reimbursements are not normally treated as income for the employee, provided they meet HMRC's qualifying conditions.

How do you treat expense reimbursement in accounting?

Each company may have slightly different accounting and bookkeeping processes. Generally, once an expense report is approved, the finance team records the expense, assigns it to the relevant cost category and raises a payable for the employee. When the reimbursement is paid, that payable is cleared.

There are also accounting tools and software which can streamline and automate much of this process. Using software reduces manual data entry, helps with categorisation and speeds up reconciliation. Processes vary by business, so it is worth reviewing your setup periodically.

How do you create an effective expense reimbursement policy?

Start with the checklist in the policy section above. Cover eligible and non-eligible expenses, spending limits by category, receipt requirements, approval workflows, submission deadlines and reimbursement timelines. Keep the language clear and practical. Review the policy at least annually and communicate it to all employees during onboarding and after updates. Acas recommends getting any expense arrangements in writing.¹

Is it better to reimburse employees or use expense cards?

Both can work, and many businesses use a combination of the two. Reimbursement tends to suit occasional or low-volume expenses. Employee expense cards can be more efficient when employees travel frequently, spend in multiple currencies or need fast access to company funds without using personal money. The right choice depends on the volume and nature of your team's spending.

Expense reimbursement works best when businesses have a clear policy and a consistent process. Employees should know what they can claim, how to submit evidence and when they will be paid back. Finance teams need the right tools to approve claims promptly, keep accurate records and meet their HMRC reporting obligations.

For businesses managing regular travel or international spending, Wise Business expense cards can help reduce manual reimbursement admin while giving you real-time visibility of what your team is spending. Visit the Wise Business pricing page for the latest details.

Sources used:

1. acas.org.uk — Expenses, Acas
2. gov.uk — Expenses and benefits for employers
3. gov.uk — Expenses and benefits: reporting and paying
4. gov.uk — Expenses and benefits: record keeping
5. gov.uk — Travel mileage and fuel rates and allowances

Sources last checked on: 24-June-2026