You will have to pay tax and National Insurance contributions (NICs) on some types of staff expenses. Similarly, you must keep records of some types of expenses and make reports to HMRC. There are specific rules for different categories of expenses. Some categories have exemptions. If an exemption applies to a particular type of expense you generally won’t need to pay tax on expenses within that category.
Exemptions are sometimes available when expenses within a particular category are kept below a certain level (eg £5 per night for incidental overnight expenses incurred during travel within the UK). It is, therefore, a good idea to check any exemptions available when you’re setting limits on expenses in your Expense Policy.
The UK Government provides guidance on tax and reporting requirements for different categories of expenses and on how to report, pay tax on, and record your staff expenses.
For more information, read Employee expenses and benefits.