How to Set Up Employee Expenses for a Small Team

Step 1: Write an expense policy

Before anything else, you need a written policy that tells employees what they can and cannot claim. Without one, you will spend time arbitrating disputes — and HMRC expects you to have one.

Your policy should cover:

• Eligible expenses — travel, accommodation, meals, client entertaining, equipment
• Spending limits — per diem rates, maximum meal costs, hotel budget
• What requires prior approval — typically anything above a threshold (e.g. £100)
• Receipt requirements — all claims must have a receipt; no receipt, no reimbursement
• Submission deadline — e.g. within 30 days of the expense
• Reimbursement timeline — when employees can expect to be paid back

Keep it short and practical. A two-page policy that employees actually read is better than a 20-page document nobody opens.

You can download a free UK expense policy template from our Expense Policy Template tool.

Step 2: Decide what categories you need

Standard expense categories for a UK small business include:

• Travel (rail, taxi, parking, flights)
• Mileage (at HMRC approved rates)
• Accommodation (hotels, Airbnb for business)
• Meals and subsistence
• Client entertainment
• Office supplies and equipment
• Subscriptions and software
• Training and development

Keeping categories consistent makes it easier to produce management accounts and identify where money is going. Your accounting software categories should match your expense categories.

Step 3: Set up an approval workflow

For most small teams, a simple one-level approval is sufficient: the employee submits, their line manager approves, finance processes the reimbursement.

As your team grows, you may want two-level approval for larger claims — for example, line manager approval up to £500, then finance director sign-off above that.

Key principles:

• No one should approve their own expenses
• Approvers should check the receipt matches the claim amount and category
• There should be a clear escalation path if the approver is unavailable

Step 4: Choose how you will reimburse employees

Three common options:

Through payroll

Expenses are included in the next payroll run. Simple, but slow — employees may wait 3–4 weeks if the expense falls just after a payroll cutoff. Expenses must still be reported on P11D (or via a PAYE Settlement Agreement) if they are not fully exempt.

Manual bank transfer

Finance processes a BACS transfer when claims are approved. Faster than waiting for payroll, but requires someone to manually initiate each transfer — which creates admin overhead.

Automated reimbursement via Stripe (Claimio)

Claimio integrates with Stripe to send reimbursements directly to the employee's bank account when a claim is approved — no manual transfers required. This is the fastest option for employees and eliminates finance admin entirely.

Step 5: Pick the right tool

For a team of 2–3, a shared spreadsheet and email approvals can work. For 5 or more employees, you need a proper tool — the manual process creates too many opportunities for error, and receipts inevitably get lost.

What to look for:

• Mobile-first — employees need to capture receipts at the point of purchase
• AI receipt scanning — eliminates manual data entry
• Built-in approval workflow — not just a submission tool
• UK mileage rates pre-configured
• Accounting software integration
• Fast reimbursement

Step 6: Communicate the process to your team

The best expense policy in the world does not help if employees do not know about it. Send the policy to all staff, walk through it in a team meeting, and make it clear where to go with questions.

If you are switching from a manual process to an app, run a short demo — it takes about 10 minutes and significantly reduces the number of "how do I..." questions.

Common mistakes to avoid

• No written policy — leaves employees guessing what is allowed
• Allowing "I'll get the receipt later" — it almost never happens
• Reimbursing too slowly — employees stop submitting promptly, creating backlogs
• No spending limits — a single large claim can cause a budget problem
• Mixing personal and business expenses — creates accounting and tax complications