A useful expense policy answers the questions employees have before they spend: what is allowed, how much is reasonable, what evidence is needed and who must approve an exception. The template gives you the structure; this guide explains the choices.
What is a company expense policy?
A company expense policy is the agreed rulebook for costs employees incur on behalf of the business. It should cover both reimbursement claims and, where relevant, spending on company cards. A clear policy makes decisions consistent without forcing finance to judge every taxi, hotel or meal from scratch.
It also protects employees. When the rules are visible, people can make reasonable choices during travel or customer work without worrying that a legitimate claim will be rejected later. For the wider process around submitting, approving and reimbursing claims, read our complete guide to employee expenses.
What should an expense policy include?
Start with the decisions that recur most often, then write rules people can apply:
- Purpose and scope: who the policy covers, including employees, directors, contractors or volunteers where applicable.
- Responsibilities: what claimants, managers and finance must check.
- Categories: travel, accommodation, meals, mileage, equipment, software, training and client entertainment. See what expenses employees can claim for a fuller category breakdown.
- Evidence and deadlines: the receipt or invoice required, the information to record and when the claim must be submitted.
- Limits and approvals: normal caps, pre-approval rules and who can approve an exception.
- Exclusions: commuting, fines, personal purchases, upgrades and other costs the business will not reimburse.
Avoid vague phrases such as “spend sensibly” unless they are supported by examples. A £25 dinner may be reasonable during an overnight trip, but the same amount could be outside policy for an ordinary day at an employee's normal workplace.
Tax, mileage and regional considerations
Tax treatment and mileage rates vary by country. The underlying journey, purchase, evidence and reimbursement method matter, so link the policy to current guidance in every country where you employ people rather than hard-coding one global rule.
Business mileage — a UK example
For the 2026/27 tax year, HMRC's Approved Mileage Allowance Payment rate for cars and vans is 55p per mile for the first 10,000 business miles, then 25p per mile. Motorcycles are 24p per mile and cycles are 20p per mile. These are approved tax rates, not a requirement that every employer reimburse at that level.
State what counts as a business journey, exclude ordinary commuting, and require a mileage log showing the date, start and destination, purpose and distance. See the current HMRC mileage allowance guidance.
Receipts and VAT
For actual-cost claims, require an itemised receipt or invoice wherever one can reasonably be obtained. Card slips and bank statements show payment but may not show what was purchased or provide the evidence needed for VAT recovery.
GOV.UK explains that VAT may be recoverable on qualifying employee travel expenses, while flat-rate payments are treated differently. Review the official VAT guidance for business expenses and agree your evidence rules with your accountant.
How to set sensible expense limits
Limits should reflect where people travel, the work they do and the level of control the business needs. Use recent claims to find realistic ranges, then separate an ordinary limit from an exception that needs approval.
If you want suggested starting limits based on your team and risk appetite, use the free expense policy generator and then bring the resulting figures back into this editable template.
Design approvals and exceptions
Routine, low-value claims should not wait behind unnecessary approval stages. Use value bands and categories to send higher-risk spend to the right person. For example, a manager may approve ordinary travel while finance reviews international trips, entertainment or anything above a set value. The same principles apply when designing broader spend approval workflows.
Define an exception process as clearly as the normal process: approval should usually happen before the cost is incurred, be recorded in writing and include the business reason. Emergencies need a route too, but “the purchase has already happened” should not become the standard exception.
Roll out, communicate and review the policy
- Ask finance, HR and operational managers to review the first draft.
- Name a policy owner, version number, effective date and next review date.
- Publish one controlled copy where employees can find it before they travel.
- Explain the biggest changes and give managers examples of common exceptions.
- Review rejected claims and recurring exceptions after the first few months.
- Check HMRC rates and business limits at least annually.
A document sets expectations; a system applies them consistently. Zahara AI Expenses can capture receipts, route claims to the right approver and keep a record of decisions after the policy is agreed. If you are moving away from paper claims, see why paperless staff expenses make the policy easier to follow.
