diff --git a/src/libs/TagsOptionsListUtils.ts b/src/libs/TagsOptionsListUtils.ts
index 9fdbfff6e1c9..cbe8d3ef2d50 100644
--- a/src/libs/TagsOptionsListUtils.ts
+++ b/src/libs/TagsOptionsListUtils.ts
@@ -127,7 +127,14 @@ function getTagListSections({
         return tagSections;
     }
 
-    if (numberOfTags < CONST.STANDARD_LIST_ITEM_LIMIT) {
+    const filteredRecentlyUsedTags = recentlyUsedTags
+        .filter((recentlyUsedTag) => {
+            const tagObject = sortedTags.find((tag) => tag.name === recentlyUsedTag);
+            return !!tagObject?.enabled && !selectedOptionNames.has(recentlyUsedTag) && tagObject?.pendingAction !== CONST.RED_BRICK_ROAD_PENDING_ACTION.DELETE;
+        })
+        .map((tag) => ({name: tag, enabled: true}));
+
+    if (numberOfTags < CONST.STANDARD_LIST_ITEM_LIMIT && filteredRecentlyUsedTags.length === 0) {
         tagSections.push({
             // "All" section when items amount less than the threshold
             title: '',
@@ -138,13 +145,6 @@ function getTagListSections({
         return tagSections;
     }
 
-    const filteredRecentlyUsedTags = recentlyUsedTags
-        .filter((recentlyUsedTag) => {
-            const tagObject = sortedTags.find((tag) => tag.name === recentlyUsedTag);
-            return !!tagObject?.enabled && !selectedOptionNames.has(recentlyUsedTag) && tagObject?.pendingAction !== CONST.RED_BRICK_ROAD_PENDING_ACTION.DELETE;
-        })
-        .map((tag) => ({name: tag, enabled: true}));
-
     if (selectedOptions.length) {
         tagSections.push({
             // "Selected" section
diff --git a/src/libs/actions/IOU/TrackExpense.ts b/src/libs/actions/IOU/TrackExpense.ts
index e4dde73f5c98..33b15195fbbb 100644
--- a/src/libs/actions/IOU/TrackExpense.ts
+++ b/src/libs/actions/IOU/TrackExpense.ts
@@ -86,6 +86,7 @@ import {clearByKey as clearPdfByOnyxKey} from '@userActions/CachedPDFPaths';
 import {buildAddMembersToWorkspaceOnyxData, buildUpdateWorkspaceMembersRoleOnyxData} from '@userActions/Policy/Member';
 import {buildPolicyData} from '@userActions/Policy/Policy';
 import type {BuildPolicyDataKeys} from '@userActions/Policy/Policy';
+import {buildOptimisticPolicyRecentlyUsedTags} from '@userActions/Policy/Tag';
 import type {GuidedSetupData} from '@userActions/Report';
 import {buildInviteToRoomOnyxData, notifyNewAction} from '@userActions/Report';
 import {stringifyWaypointsForAPI} from '@userActions/Transaction';
@@ -146,7 +147,7 @@ type TrackExpenseInformation = {
     actionableWhisperReportActionIDParam?: string;
     optimisticReportID: string | undefined;
     optimisticReportActionID: string | undefined;
-    onyxData: OnyxData<BuildOnyxDataForTrackExpenseKeys | BuildPolicyDataKeys | typeof ONYXKEYS.SELF_DM_REPORT_ID>;
+    onyxData: OnyxData<BuildOnyxDataForTrackExpenseKeys | BuildPolicyDataKeys | typeof ONYXKEYS.SELF_DM_REPORT_ID | typeof ONYXKEYS.COLLECTION.POLICY_RECENTLY_USED_TAGS>;
 };
 
 type GetTrackExpenseInformationTransactionParams = {
@@ -835,7 +836,7 @@ function getTrackExpenseInformation(params: GetTrackExpenseInformationParams): T
         defaultWorkspaceName,
     } = params;
     const {payeeAccountID = getUserAccountID(), payeeEmail = getCurrentUserEmail(), participant} = participantParams;
-    const {policy} = policyParams;
+    const {policy, policyTagList, policyRecentlyUsedTags} = policyParams;
     const {
         comment,
         amount,
@@ -858,7 +859,7 @@ function getTrackExpenseInformation(params: GetTrackExpenseInformationParams): T
         gpsCoordinates,
     } = transactionParams;
 
-    const onyxData: OnyxData<BuildOnyxDataForTrackExpenseKeys | BuildPolicyDataKeys | typeof ONYXKEYS.SELF_DM_REPORT_ID> = {
+    const onyxData: OnyxData<BuildOnyxDataForTrackExpenseKeys | BuildPolicyDataKeys | typeof ONYXKEYS.SELF_DM_REPORT_ID | typeof ONYXKEYS.COLLECTION.POLICY_RECENTLY_USED_TAGS> = {
         optimisticData: [],
         successData: [],
         failureData: [],
@@ -1144,6 +1145,20 @@ function getTrackExpenseInformation(params: GetTrackExpenseInformationParams): T
     onyxData.successData?.push(...(trackExpenseOnyxData.successData ?? []));
     onyxData.failureData?.push(...(trackExpenseOnyxData.failureData ?? []));
 
+    const optimisticPolicyRecentlyUsedTags = buildOptimisticPolicyRecentlyUsedTags({
+        policyTags: policyTagList ?? {},
+        policyRecentlyUsedTags,
+        transactionTags: tag,
+    });
+
+    if (!isEmptyObject(optimisticPolicyRecentlyUsedTags) && chatReport?.policyID) {
+        onyxData.optimisticData?.push({
+            onyxMethod: Onyx.METHOD.MERGE,
+            key: `${ONYXKEYS.COLLECTION.POLICY_RECENTLY_USED_TAGS}${chatReport.policyID}`,
+            value: optimisticPolicyRecentlyUsedTags,
+        });
+    }
+
     return {
         createdWorkspaceParams,
         chatReport,
@@ -2151,6 +2166,7 @@ function shareTrackedExpense(trackedExpenseParams: TrackedExpenseParams) {
         | typeof ONYXKEYS.NVP_LAST_DISTANCE_EXPENSE_TYPE
         | typeof ONYXKEYS.GPS_DRAFT_DETAILS
         | typeof ONYXKEYS.SELF_DM_REPORT_ID
+        | typeof ONYXKEYS.COLLECTION.POLICY_RECENTLY_USED_TAGS
     > = {
         optimisticData: trackedExpenseOnyxData?.optimisticData ?? [],
         successData: trackedExpenseOnyxData?.successData ?? [],
@@ -2281,7 +2297,7 @@ function trackExpense(params: CreateTrackExpenseParams) {
         defaultWorkspaceName,
     } = params;
     const {participant, payeeAccountID, payeeEmail} = participantParams;
-    const {policy, policyCategories, policyTagList} = policyData;
+    const {policy, policyCategories, policyTagList, policyRecentlyUsedTags} = policyData;
     const parsedComment = getParsedComment(transactionData.comment ?? '');
     transactionData.comment = parsedComment;
     const {
@@ -2409,6 +2425,7 @@ function trackExpense(params: CreateTrackExpenseParams) {
             policy,
             policyCategories,
             policyTagList,
+            policyRecentlyUsedTags,
         },
         retryParams,
         isASAPSubmitBetaEnabled,
diff --git a/src/libs/actions/IOU/types/TrackedExpenseParams.ts b/src/libs/actions/IOU/types/TrackedExpenseParams.ts
index 863df5a94eb6..db7fafaecc44 100644
--- a/src/libs/actions/IOU/types/TrackedExpenseParams.ts
+++ b/src/libs/actions/IOU/types/TrackedExpenseParams.ts
@@ -57,6 +57,7 @@ type TrackedExpenseParams = {
         | typeof ONYXKEYS.NVP_LAST_DISTANCE_EXPENSE_TYPE
         | typeof ONYXKEYS.GPS_DRAFT_DETAILS
         | typeof ONYXKEYS.SELF_DM_REPORT_ID
+        | typeof ONYXKEYS.COLLECTION.POLICY_RECENTLY_USED_TAGS
     >;
     reportInformation: TrackedExpenseReportInformation;
     transactionParams: TrackedExpenseTransactionParams;
diff --git a/src/pages/Share/SubmitDetailsPage.tsx b/src/pages/Share/SubmitDetailsPage.tsx
index f13bb8b679a5..5310468ee24d 100644
--- a/src/pages/Share/SubmitDetailsPage.tsx
+++ b/src/pages/Share/SubmitDetailsPage.tsx
@@ -220,7 +220,7 @@ function SubmitDetailsPage({
                 report: report ?? {reportID: reportOrAccountID},
                 isDraftPolicy: false,
                 participantParams: {payeeEmail: currentUserPersonalDetails.login, payeeAccountID: currentUserPersonalDetails.accountID, participant},
-                policyParams: {policy, policyTagList: policyTags, policyCategories},
+                policyParams: {policy, policyTagList: policyTags, policyCategories, policyRecentlyUsedTags},
                 action: CONST.IOU.TYPE.CREATE,
                 transactionParams: {
                     attendees: transaction.comment?.attendees,
diff --git a/src/pages/iou/request/step/confirmation/useExpenseSubmission.ts b/src/pages/iou/request/step/confirmation/useExpenseSubmission.ts
index c9c0ba708124..92fc60ed3f56 100644
--- a/src/pages/iou/request/step/confirmation/useExpenseSubmission.ts
+++ b/src/pages/iou/request/step/confirmation/useExpenseSubmission.ts
@@ -478,6 +478,7 @@ function useExpenseSubmission(params: UseExpenseSubmissionParams) {
                     policy,
                     policyCategories,
                     policyTagList: policyTags,
+                    policyRecentlyUsedTags,
                 },
                 transactionParams: {
                     amount: item.amount,