Last updated: 16 September 2026
A per diem is tax free only up to the limit the country's own tax authority publishes. Pay more than that, or keep the wrong records, and the extra amount counts as pay. It then runs through payroll and is taxed like salary. In the UK, HMRC's benchmark rate is £5 a day for a qualifying journey of more than five hours, and these rates have applied since 6 April 2016.
So the honest answer is: often yes, but it depends where the person is employed. This page covers what a per diem is, who sets the limit, what the UK publishes, and what to agree in writing before your first pay run.
What is a per diem in payroll terms?
A per diem is a fixed daily amount paid to cover meals and similar costs while an employee travels for work. It replaces the job of collecting a receipt for every coffee and sandwich. The employee gets the same amount for the same kind of trip, and nobody has to price each item after the event.
In payroll terms it is not an expense claim. It is a payment made under a rule. The rule sets who can receive it, how long they must be away, and how much they can get. If the payment stays inside that rule, it is not treated as earnings. If it steps outside, payroll has to treat it as earnings and deduct tax in the usual way.
Who decides whether a per diem is tax free?
The tax authority in the country where the person is employed decides. Not your finance team, not your travel policy, and not whoever runs your payroll. Each country sets its own limits, its own conditions and its own record keeping rules. A rate that is fine in one country can be taxable in the country next door.
Many countries do publish flat rates, but they are not all the same shape. Some set a daily amount based on hours away from home. Some set different amounts for travel inside and outside the country. Some do not publish one national rate for private employers at all, and expect each employer to show its own working instead.
The Netherlands sits in that last group. The Dutch tax authority allows a fixed untaxed cost allowance, but only where the amount is based on research into the costs actually incurred, and an employer cannot simply point at research done by somebody else. That is a very different piece of work from copying a published figure into a policy.
What does HMRC publish for the UK?
HMRC publishes benchmark scale rates that a UK employer can pay for meals during qualifying business travel. The maximum tax free amount is £5 a day where the travel lasts more than five hours, £10 a day where it lasts more than ten hours, and £25 a day where it lasts more than fifteen hours and is still going at 8pm. These come from the Income Tax (Approved Expenses) Regulations 2015 and have applied since 6 April 2016.
The conditions matter as much as the amounts. The travel has to be part of the job or to a temporary workplace, and not ordinary commuting. The employee has to be away for the qualifying number of hours. The employee has to actually buy a meal after the journey starts. Miss one of those and the payment is not covered, whatever the amount.
A UK employer can also agree its own rate with HMRC instead of using the benchmark figures. Either way, the employer still has to be able to show the travel qualified. You can read HMRC's own summary of scale rate payments for how that works in practice.
What records does payroll need?
Payroll needs enough evidence to show that each payment met the country's conditions. In most cases that means a record of the journey, the dates, the hours away and the business reason for the trip. The point is to prove the payment was allowed, not to price every sandwich.
In the UK, employers no longer have to check a receipt for every benchmark payment, but they do still need a way of confirming the employee was on qualifying travel. Other countries are stricter and expect receipts even where a flat rate exists. Ask the question country by country rather than assuming one approach travels well.
The payslip matters too. An allowance folded into gross pay is hard to explain later, to an employee or to an auditor. Keep it on its own line, labelled for what it is.
What to settle before the first pay run
This is the part that tends to go wrong. Per diem support is rarely on the list people work through before they sign, because it only shows up once payroll is live and the first claims arrive. By then the employee is already out of pocket and waiting.
Get the answer in writing, per country, before your first payday. A verbal yes during onboarding is not enough, because the person giving it is often not the person who has to push the payment through a payroll run. Written confirmation also gives you something to point at if the answer later changes.
| What to settle | Why it matters | What a good answer looks like |
|---|---|---|
| Which countries the allowance covers | Limits and conditions differ in every country | A written answer for each country you employ in |
| The published limit in each one | Anything above it is taxed as pay | The amount, the source and the year it applies |
| Whether receipts are still needed | Some countries expect evidence even with a flat rate | A clear yes or no per country |
| Who checks the limit each month | Someone has to catch a claim that goes over | A named team, not an assumption |
| How it shows on the payslip | Employees and auditors both need to see it | Its own line, labelled, not merged into salary |
| What happens above the limit | The excess becomes taxable pay | Agreed in advance, including who carries the tax |
If nobody can answer those in writing, that is your answer. The detail depends on where your people are employed and how they travel, so it is worth a short conversation rather than a policy written from one country's rules.
Teamed is an Employer of Record in 187+ countries. If you want to know how a per diem would work for your own people, Talk to an Expert at Teamed and we will go through it country by country. Our notes on UK tax and payroll and on how EOR payroll differs from in-house payroll cover the wider picture.