How to Save Money for your Christmas Party
Organising a Christmas party is a great way to thank your team and boost morale and with the right planning, it can also be tax efficient.
While there is no specific HMRC allowance for Christmas parties, businesses can claim tax relief on staff events that meet certain conditions.
At ABMV, we regularly advise business owners on how to celebrate with their teams while staying compliant and avoiding unexpected tax bills.
Tax Relief on Staff Christmas Parties
HMRC allows companies to claim tax relief on the cost of an annual staff event, such as a Christmas party, provided the qualifying criteria are met.
The most important rule is the £150 per person limit, which includes VAT. As long as the total cost per attendee stays within this threshold, the business can treat the expense as tax deductible and employees will not be taxed on attending.
Costs that can be included within the £150 limit are:
Food and drink
Venue hire and entertainment
Transport
Overnight accommodation
To calculate the cost per head, divide the total cost of the event by the total number of people attending.
Who Can Attend the Event?
To qualify for the tax exemption, the event must be:
Open to all employees
Available to all staff at a specific location (this is permitted)
Not restricted to certain groups, such as directors or senior management only
If customers, suppliers, or other third parties attend the event, the tax treatment becomes more complex and professional advice should be taken.
Multiple Staff Events During the Year
Businesses can hold more than one staff event each year. However, the combined cost per head for all events must not exceed £150 (including VAT).
If the total cost goes over this limit, the entire amount — not just the excess — will be treated as a benefit in kind (BIK) and may be subject to tax and National Insurance.
What Happens If the £150 Limit Is Exceeded?
Where the £150 threshold is exceeded, the full value of the event becomes taxable as a benefit in kind. This can result in:
Income tax for employees and directors
Employer National Insurance liabilities
This is why careful planning is essential before organising staff entertainment.
Employee Christmas Gifts and Tax
Many employers choose to give Christmas gifts to their staff. HMRC allows certain low-value gifts to be classed as trivial benefits, which are tax-free when specific conditions are met.
A gift will qualify as a trivial benefit if:
It costs £50 or less (including VAT)
It is not cash or a cash voucher
It is not contractual
It is not a reward for work or performance
It is not provided under a salary sacrifice arrangement
Common examples include chocolates, wine, or small gift hampers.
Trivial Benefits for Directors
Directors of close companies are subject to an annual limit of £300 per tax year for trivial benefits. This equates to up to six £50 gifts. There is no annual limit on trivial benefits for other employees, provided each individual gift meets the qualifying criteria.
Tax Treatment of Larger Gifts
If a gift does not meet the trivial benefit rules, it must be reported and taxed using one of the following methods:
Through PAYE via the payroll
Via a P11D form
Under a PAYE Settlement Agreement (PSA), where the employer settles the tax liability
Each option has different tax and National Insurance implications, so choosing the most suitable approach is important.
Need Advice on Christmas Parties or Staff Gifts?
The tax rules around staff entertainment and gifts can be complex and are easy to get wrong. The team at ABMV Accountants can help you plan tax-efficient staff events, ensure compliance with HMRC rules, and avoid unexpected liabilities.
If you would like tailored advice ahead of the festive season, contact ABMV to arrange a consultation and enjoy Christmas with confidence.