What is Per Diem, and is it a good expense system? A simple guide

Last updated: August 2026

Corporate travel finance teams spend countless hours on expense-related tasks like tracking down missing receipts, rekeying data, and reconciling endless line items. We call this shadow work, the manual, repetitive cycle that chips away at your team's focus and drains productivity.

Implementing a structured per diem program is one of the most effective ways to eliminate this administrative friction. It gives your teams the agility to move fast while providing finance departments with ironclad expense control.

This guide breaks down everything businesses need to know about per diem, including its definition, 2026 HMRC rates for the UK, comparison with actual expense reimbursement, and how to find rates globally.

What is per diem?

The term per diem is Latin for "per day", and it is a fixed daily allowance that a company provides to people to cover expenses incurred while travelling for work.

In the UK, HM Revenue and Customs (HMRC) allows you to claim business expenses under the term “subsistence allowance.” 

Instead of requiring travellers to pay out of pocket and save every physical receipt for later reimbursement, employers provide a flat daily stipend. This method offers massive benefits:

• For companies, it sets predictable travel budgets, eliminates rogue spending, and removes the administrative burden of manually auditing hundreds of micro-transactions.

• For business travellers, it grants autonomy, streamlines field workflows, and removes the pressure of preserving every coffee and lunch receipt.

What does per diem cover in the UK?

Per diem, or subsistence/travel allowance, includes meals and drinks, accommodation, car parking charges and more. Put simply, subsistence refers to the cost of sustaining an employee when they’re travelling for business.

These expenses can be written off as business costs, meaning they’re not liable for taxation or National Insurance. You are also able to claim back any VAT spent on these.

What does per diem exclude?

HMRC’s benchmark per diem rates cover meals and incidentals only, not accommodation, and there are also restrictions on meals covered. 

You can’t claim a per diem meal allowance if: 

• No meal or drink was actually purchased

• The meal was provided for free. For example, as part of a training course, event, or conference

• The meal was eaten at home before leaving or after returning

• A meal was included with travel or accommodation (such as a train or flight)

• The expense included alcohol (this isn’t covered under HMRC’s rules)

• The journey was a regular commute to a permanent workplace

Meal allowance rates

HMRC updates the exact amounts that can be claimed as part of a subsistence allowance in the UK every year, so make sure to check the official HMRC rates to ensure that you have the latest up-to-date information. In 2026, the official HMRC meal allowance rates for UK business travel are:

Many companies will have higher per diem rates for C-level executives, or just a more generous travel budget. However, if these rates are exceeded, tax is due on the excess.

If you or your colleagues are travelling a lot and regularly go over these amounts, then it’s a good idea to contact HMRC directly and negotiate an allowance specific to your business. For technical information on scale of expenditure, visit the HMRC's online resource, where they provide examples of acceptable expense claims.

Important Note: The above HMRC travel and subsistence rates are ONLY for travel within the UK. For business trips made outside the UK, the rates differ.

Accommodation allowance rates

The UK government has no agreed benchmark scale rates for overnight stay expenses, unlike its international rates below. If this working away from home allowance is a recurring cost for your business, you will need to establish an agreed rate with HMRC. See the HMRC page on bespoke agreements for more information.

How do HMRC subsistence rates work?

HMRC sets conditions and standard rates for which you can claim back any tax spent. This enables businesses to give subsistence payments without constant authorisation and approval. When looking for this online, you will see HMRC call these "scale rate payments".

The main conditions required to claim meal expenses are:

• The cost of food or drink must be incurred after the business trip has started

• The trip must be beyond their usual commute and be done as part of official business

• The journey must take the business traveller away from their normal place of work for 5 hours or more

As of April 2019, HMRC no longer requires businesses to provide receipts for every cost incurred as part of a business journey. This means a lot less reimbursement paperwork for business owners, finance teams and claimants.

Now businesses can claim a set amount for each day of travel and only need to demonstrate that someone has incurred some kind of expense during their business trip. For example, if a traveller on a business trip eats three meals, they only need to provide a receipt for the evening meal.

Tax rules: Are meal allowances considered taxable income?

Since 1998, meal allowances in the UK have not been taxable. 

Given the expenses meet the requirements, businesses can deduct the allowances from their taxable revenue. This leaves less taxable income and reduces the amount paid to HMRC.

These expenses cannot be claimed if:

• A meal or beverage is not purchased

• The meal does not constitute additional expenditure

• The “staying with friends or relatives allowance” is claimed

• Meals have been taken at home

• Meals are provided during a training course, conference or similar activity

• Meals are provided on the train or plane and included in the ticket cost

Per diem vs. actual expense reimbursement

Businesses tend to choose one of two ways to manage employee business travel costs: per diem or actual expense reimbursement.

Selecting the right approach for reimbursing work travellers

The choice between per diem payments and actual expense reimbursement depends on your organisation’s specific needs, policies, and objectives. Consider the following factors when making your decision:

1. Expense volume: If your colleagues frequently incur expenses, actual expense reimbursement may provide better control and accuracy

2. Policy compliance: If strict adherence to expense policies and tax regulations is crucial, actual expense reimbursement offers detailed documentation for compliance assurance

3. Simplicity vs. accuracy: Per diem offers simplicity, while actual expense reimbursement provides accuracy. Choose the balance that aligns with your organisation’s priorities

4. Technology integration: Consider how automation and AI-driven expense management software can streamline either method, reducing manual work and errors. You can estimate your potential efficiency gains using a spend management ROI calculator.

To illustrate the impact of these approaches, let’s look at two hypothetical scenarios:

Scenario 1: Per Diem

Company A implements per diem and reduces expense report processing time by 30%.

The company saves £50,000 annually in administrative costs.

However, an audit reveals £20,000 in overpayments due to fixed per diem rates exceeding actual expenses.

Scenario 2: Actual expense reimbursement

Company B opts for actual expense reimbursement with automated expense management.

Compliance violations decrease by 25%, resulting in £10,000 in tax savings.

Teams appreciate accurate reimbursements, leading to increased job satisfaction.

Global per diem rates

Guidelines for international per diem allowance

Expense rates for employees travelling outside the UK are set by the government.

You can learn more about per diem rates in different countries in our compliance center.

Legal considerations for employers and employees

Compliance with labour laws and tax regulations is paramount for employers and employees in Europe, Switzerland, and the US when it comes to per diem reimbursement.

Establishing clear policies and procedures is essential to navigate the intricacies of regional regulations successfully. People must also be aware of their rights and responsibilities concerning per diem, including its impact on taxation, documentation requirements, and any restrictions related to personal expenses while travelling in these specific regions.

How businesses can establish a clear policy

• Tier your rates by destination: Do not apply a flat UK per diem rate to international trips. Align your budgets with the specific statutory per diem tiers set by the destination country's tax authority (e.g., GSA in the US or federal rules in Germany) to avoid unexpected corporate or individual tax liabilities.

• Define the tracking mechanics: Specify how the company treats meals provided by a host or included in a hotel stay. In many European regions, companies must deduct an exact percentage from the daily allowance if a meal is provided.

• Automate policy enforcement: Relying on manual math creates what we call shadow work, the endless stream of invisible tasks that drains your finance team's focus. Use an intelligent travel and spend platform like Perk to present your global compliance rules, automatically apply local per diems, and flag out-of-policy exceptions in real time.

Considering per diem for your business?

If your business has people regularly travelling for work, you might be considering adding some simplicity to expense reporting by opting for per diem payments - where rates are fixed and predefined.

Or perhaps accuracy is key and you are looking to make budgets, and so opt for actual expense reimbursement, where people are reimbursed precisely for what they spend. 

Once your business has decided on the best expense system, the Perk platform brings expense reporting and other travel spending into one intelligent platform. With real-time AI automation, built-in compliance checks, and a seamless user experience, Perk removes the shadow work of expense management so you stay in total control.  

Costs controlled. Time saved. Productivity boosted.  

Schedule a demo with Perk today to see how simple real-time spend management can be.