Expense claims: recording costs paid personally
How to create an expense claim or mileage claim - explained
When you or an employee pays a business cost using personal funds, it must be recorded in Xero as a company expense to be claimable for Corporation Tax and, where applicable, VAT.
Creating an expense claim in Xero
In Xero, go to the ‘Purchases’ menu and select ‘Expenses’, then ‘New Expense’, then ‘Expense Claim’. Upload or drag in a photo of the receipt. Enter the purchase amount (including VAT), the date, a description, the category (account code), and the VAT rate. Under "How did you pay?", select personal money so the claim is reimbursable to you. Submit the claim for approval.
Once approved, Xero creates a bill for the claim and the amount is recorded as owed to you, typically via the Director Loan Account. The reimbursement is then paid from the company bank account and reconciled against the claim. Until payment is recorded, the claim sits in the ‘To Pay’ tab.
Mileage claims
Record mileage in Xero Expenses by selecting ‘Mileage’ as the type. Enter the date, distance in miles, and business purpose. Xero calculates the reimbursement at the HMRC rate automatically. Keep a separate mileage log with the route and purpose for each journey in case of an HMRC enquiry.
💡 Good to know: Submit expense claims monthly, not annually. Year-end expense submissions dating back 12 months are hard to verify and may lack sufficient detail to satisfy HMRC. Monthly submissions are easy to review and keep your Director’s Loan Account balance accurate.
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