UK guide · Updated November 2026
How to reimburse employee expenses in the UK
A straightforward reimbursement process starts with the employee's expense details and supporting evidence. A manager approves the business purpose, finance checks the treatment, and the business pays through payroll or a separate payment. Keep the expense, approval and payment record together, so employees know what they can claim and when they will be repaid.
How do UK businesses reimburse employees?
An employee pays for something connected with their work, submits an expense claim and is repaid after review. A practical process has four parts:
- The claim. What was bought, when, how much it cost and why it was needed.
- The evidence. A receipt, invoice or other appropriate supporting record.
- The review. Confirmation of the business purpose, the company policy and the accounting treatment.
- The payment. Reimbursement with a recorded date, method and reference.
For an employee visiting a client, that might mean train tickets, a hotel invoice and parking receipts in one report, which finance reviews and pays together.
What should your expense policy cover?
| Policy area | What employees need to know |
|---|---|
| Covered expenses | Which travel, meals, accommodation and business purchases they can claim |
| Spending limits | Limits by category, and when advance approval is needed |
| Supporting evidence | Which receipts, journey details and explanations to provide |
| Submission timing | When claims should be submitted |
| Approval | Who reviews the claim and handles exceptions |
| Payment | The reimbursement schedule and cut-off dates |
| Missing receipts | How to request a replacement or document an exception |
| Advances | How money paid before a trip is reconciled and unused amounts returned |
A policy helps employees and reviewers follow the same process. It should also reflect employment contracts and the legal requirements that apply.
Take care where employees fund costs their work requires. Unreimbursed work expenses can reduce pay for National Minimum Wage purposes, and expense repayments do not count as pay for the minimum wage.
Are employee reimbursements taxable?
Some qualifying business expenses are covered by an exemption from tax and reporting. Whether an exemption applies depends on the expense and the conditions met, not on whether a manager approved it.
HMRC distinguishes repayment of actual costs from qualifying benchmark or bespoke scale-rate arrangements. Other payments may need tax, National Insurance or reporting treatment. Keep three decisions separate:
- Will the company reimburse the employee?
- How should the payment be treated for employment tax?
- Can the business reclaim any VAT?
Your accountant or payroll adviser should confirm the treatment where it is unclear.
Business travel is different from ordinary commuting. Travel to a client or another workplace is assessed against the business-travel rules. Ordinary travel between home and a permanent workplace generally does not qualify for tax relief, and reimbursing it does not make it tax-free. Temporary workplaces and more complex travel patterns need their own assessment.
What should an expense claim include?
| Information | What to record |
|---|---|
| Employee | Name and payroll or employee reference |
| Date | When the expense was incurred |
| Supplier | Who was paid |
| Amount and currency | The amount the employee paid |
| Business purpose | Why the cost was necessary |
| Receipt or invoice | Supporting evidence of the purchase |
| Project or cost centre | Where the business should allocate the cost |
| Payment source | Whether the employee or the company paid |
| Additional details | The journey, attendees or other context needed for review |
HMRC's record-keeping guidance asks employers to keep details of expenses and benefits. For reimbursed travel, it highlights recording when and why the employee travelled, with receipts where possible. Mark company-paid purchases clearly so they are not also reimbursed to the employee.
Choose how to pay expenses
| Method | Useful when | What to check |
|---|---|---|
| Alongside payroll | You want reimbursements paid on an established schedule. | Use a separate expense entry and the correct tax treatment. |
| Separate bank transfer | Employees need paying before payroll, or expenses have their own weekly or fortnightly run. | Verify payment details, the authorisation and the payment result. |
| Petty cash | Occasional small local purchases. | Keep receipts, signed payment vouchers and a reconciled cash record. |
A bank transfer may be made by Bacs or another payment service your bank supports. Bacs is a payment method, not a tax classification. If you use a file export, confirm that your bank or payroll provider accepts its layout. Creating or uploading a file does not prove that employees have been paid.
A six-step reimbursement process
- Set the submission and payment datesTell employees when claims must be submitted and when approved expenses are paid. For example, claims approved by Tuesday are paid in Friday's expense run. That is an operating example, not a statutory timetable.
- Collect receipts as expenses happenEmployees photograph paper receipts and forward emailed invoices while the details are fresh, and add the business purpose, client or project. For large travel costs, consider a company-paid booking or an advance.
- Approve the business purposeThe manager checks the expense relates to the employee's work and reviews any policy exception. If information is missing, return the claim with a specific note: "Please add the client and the reason for the journey" helps more than "Insufficient details".
- Complete the finance reviewFinance checks the evidence, coding, payment source and tax treatment, and whether the expense has already been claimed or paid.
- Prepare and authorise the paymentGroup approved claims for the payment date and confirm the employee references or bank details the payment method needs. Where practical, have a second person review the payment, and verify recent bank-detail changes through a trusted contact.
- Record the payment outcomeRecord the date, method and reference against the claims. Investigate rejected or returned payments before marking them complete, then tell employees.
What if a receipt is missing?
Ask the employee to request a replacement from the supplier, or find the emailed receipt, first. If that is not possible, document:
- The purchase date, supplier and amount.
- What was bought and its business purpose.
- Why the receipt is unavailable.
- Any alternative evidence.
- Who reviewed the exception.
Finance should assess reimbursement and tax treatment separately. Deciding to repay an employee does not mean the evidence is sufficient for every tax purpose.
Keep VAT recovery separate from reimbursement approval
A VAT-registered business may be able to reclaim VAT on eligible employee business expenses, subject to the conditions. VAT showing on a receipt does not mean it is recoverable.
HMRC's guidance distinguishes business travel expenses from personal spending and business entertainment, on which VAT is generally blocked. It also treats flat-rate expense payments differently from repayment of actual costs for VAT. For larger purchases a full VAT invoice is needed: a simplified invoice is accepted only up to £250.
Keep the receipt and the tax details available for finance, and let your accountant decide what goes into the VAT return.
How long should expense records be kept?
Expenses and benefits records
HMRC asks employers to keep these for three years from the end of the tax year they relate to.
VAT records
These generally need to be kept for at least six years, and longer for some schemes.
Do not delete receipts automatically after the shorter period. Set a retention policy that covers every tax, accounting and legal requirement.
Common mistakes
- Treating approval as a tax decision. A manager's approval does not establish an exemption or VAT recovery.
- Classifying ordinary commuting as business travel. Check the journey and the workplace.
- Reimbursing a company-paid purchase. Record who paid before preparing the payment.
- Giving employees no payment date. Publish the schedule and explain delays.
- Paying changed bank details without checking. Confirm the change before releasing money.
- Marking a claim paid when a file is created. Check the payment outcome first.
- Leaving advances unreconciled. Match each advance to its expenses and record any balance returned.
- Separating receipts from payment records. Keep a traceable record from purchase to reimbursement.
How Reimgo supports expense reimbursement
Capture receipts on WhatsApp, by email or in the app
Reimgo reads the receipt into a draft expense, including the VAT and the supplier's VAT number. The employee checks the details and adds the business purpose, project or cost centre.
Mileage at the HMRC approved rate
Employees enter the date, the business miles and a description of the journey. Reimgo applies the HMRC approved rate of 45p a mile and keeps the rate used with the claim.
Review reports with the receipts attached
Managers review expenses, receipts and policy warnings together and can return a claim with a note. Finance completes the final review, and the VAT report flags expenses over £250 without a supplier VAT number.
Prepare a reimbursement batch
Finance groups approved reports for a payment date. By default a second person releases the batch with a fresh authenticator code, and nobody can release a batch that pays themselves.
Export the file and record the payment
Download a standard CSV for payroll, or a Bacs Standard 18 file for your bank or Bacs bureau. After payment, finance marks the batch paid with the date and reference, and employees receive an email.
Reimgo prepares files and keeps records. Your payroll provider or bank makes the payment, and finance and your accountant remain responsible for the tax treatment and any HMRC reporting.
Questions about reimbursing employee expenses
Can we pay expenses alongside salary?
Yes. Keep the expense amount separately identifiable and apply the correct payroll treatment. Paying it alongside salary does not, by itself, make it taxable or exempt.
Do all expense claims need to be reported to HMRC?
No. Qualifying exemptions can remove the reporting requirements for certain business expenses. Check the conditions for the expense concerned, rather than applying one treatment to every claim.
How quickly should we reimburse employees?
Publish a payment schedule that meets your contractual and legal obligations. Provide a route for urgent or large expenses, and consider minimum-wage implications where employees fund costs their work requires.
Can employees claim travel to their normal workplace?
Your company may choose to cover it, but ordinary commuting generally has different tax treatment from qualifying business travel. Approval under your policy does not change that distinction.
Can we reimburse an expense without reclaiming its VAT?
Yes. Whether the employee should be repaid and whether the business can reclaim the VAT are separate questions.
Does an employee need a receipt for mileage?
Mileage claims need journey evidence, such as the date, destination, business purpose and distance, rather than a purchase receipt for the miles. The payment and VAT rules need separate consideration, so have your accountant confirm your process.
How long should we keep expense records?
HMRC asks employers to keep expenses and benefits records for three years from the end of the tax year they relate to. VAT records generally need to be kept for at least six years. Set one retention period that covers every requirement.
Does Reimgo make the payment?
No. Reimgo prepares reimbursement batches and files. Your bank or payroll provider pays the employee, and finance records the outcome in Reimgo.
Sources and review date
- HMRC: Expenses and benefits exemptions
- HMRC: Expenses and benefits record keeping
- HMRC: Ordinary commuting and private travel (490, chapter 3)
- HMRC: Reclaiming VAT on business expenses
- HMRC: Keeping VAT records
- GOV.UK: Calculating the minimum wage
Sources checked: 10 November 2026. Rules change, and this guide summarises them in plain words. Check the official guidance before you rely on any point.
This guide gives general information, not legal, payroll or tax advice. Ask a qualified adviser how the requirements apply to your business.
Give employees a clear path from receipt to reimbursement
Capture a receipt, approve an expense report and prepare a reimbursement batch for your next payment date.