Data Classification & Handling Policy

Ready

Word Markdown

Purpose. Defines the sensitivity tiers your data falls into and the handling rules for each — including the rules that decide what may be pasted into an AI tool.

When to use it. Early. Classification underpins access control, AI input rules, and most security decisions. Review annually.

How to use it. Use four tiers at most; every tier beyond that is one people will not remember. The AI handling row in section 2 is the part staff will actually look up — make sure it names specific approved tools, not a category.

Closes assessment gaps

This template addresses Q24, Q27, Q39 in the readiness assessment.

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The template

1. Classification tiers

Tier	Definition	Examples	Impact if disclosed
Public	Approved for public release.	Published marketing, annual report	None
Internal	Routine business data.	Internal comms, non-sensitive analytics	Minor
Confidential	Sensitive business or personal data.	Customer records, employee data, contracts	Significant
Restricted	Most sensitive; severe impact.	Special category data, credentials, M&A, security detail	Severe

2. Handling rules

Control	Public	Internal	Confidential	Restricted
Storage	Any approved	Approved systems	Approved + access control	Approved + encryption + logging
Access	Open	All staff	Role-based, owner-approved	Named individuals, owner-approved
Sharing externally	Free	NDA	Contract + DPA	Owner + Legal approval
Email	Permitted	Permitted	Encrypted	Not permitted — secure transfer only
AI tool input	Permitted	Approved tools only	Approved enterprise tools with no-training guarantee	Prohibited unless explicitly approved for that system
Retention	Per schedule	Per schedule	Per schedule + review	Per schedule + documented review
Disposal	Standard	Standard	Verified	Verified + certificate

The AI row is the one that gets breached

Staff paste customer data into public chatbots because it is convenient and the rule was not to hand. Publish this row separately, name the approved tools, and put it where people work.

3. Applying a classification

1. The Data Owner assigns the classification at creation or acquisition.
2. Where a dataset holds mixed tiers, the highest tier applies to the whole set unless it is separated.
3. Classification is recorded in the Data Asset Register.
4. Derived data — including model outputs and embeddings — inherits the classification of its most sensitive input unless a documented assessment lowers it.

Derived data inherits

Embeddings and model outputs derived from Confidential data are Confidential. This is routinely missed, and it is how sensitive data ends up in an unprotected vector store.

4. Special category & regulated data

Special category personal data, criminal offence data, children's data, and payment card data carry additional requirements — see Processing & DPIA Log. Default these to Restricted unless assessed otherwise.

5. Labelling

Where the platform supports it, apply the label in the tool. Where it does not, record classification in the register. [Specify your labelling mechanism.]

6. Review

Version	Date	Owner	Approved by
0.1	[date]	[role]	[committee]

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Adaptation notes

• Small organisations: Three tiers — Public, Internal, Confidential — is usually enough. Keep the AI input row regardless; it is the highest-value line in the policy.
• Existing security classification: Do not create a competing scheme. Map onto what security already uses and add only the AI handling row.
• Public sector: Align to your national scheme (e.g. OFFICIAL / SECRET) rather than these labels, and add the FOI disclosure consideration to each tier.

Related

• Data Governance Policy — Ready
• Acceptable AI Use Policy — Ready
• Data Asset Register — Ready
• Processing & DPIA Log — Ready

Not legal advice

These templates are a head start, not a substitute for professional judgement. Adapt them to your jurisdiction, sector, and risk appetite, and have qualified counsel review anything material before you rely on it.