The festive season is one of the most anticipated times of year for businesses and employees alike. With team celebrations, Christmas parties, and gift-giving traditions in full swing, many employers begin asking the same important question: which staff entertainment and gifts are tax-allowable, and what can be claimed as a business expense at Christmas?
To keep the holiday cheer flowing without unexpected tax surprises, it’s essential to understand the official guidance provided by HM Revenue and Customs (often referred to as HMRC). Whether you’re organising an annual staff Christmas party or preparing seasonal gifts for your team, this straightforward guide breaks down Christmas party tax rules, staff gift allowances, trivial benefits, director gift limits, and what must go through payroll.
Let’s unwrap the details so you can celebrate with confidence—and stay compliant while doing it.
Staff Christmas Party: The Rules
HMRC allows you to claim the cost of your staff Christmas party providing the following conditions are met:
• It must be an annual event
• It must be open to all employees
• You can spend up to £150 per person per accounting year
• The limit includes everything from food, drinks, venue and transport
Important:
If the total cost goes over £150 per person, the full amount becomes taxable.
Staff Christmas Gifts: What’s Allowed?
HMRC also allows certain types of gifts, known as “trivial benefits”.
Trivial benefits are tax-free if:
• They cost £50 or less
• They are not cash or a cash voucher
• They are not a reward for work or performance
• They are not part of a contract
Examples include: small hampers, chocolates, wine, seasonal gift items, or non-cash gift cards.
Company directors of close companies can receive up to £300 per tax year in trivial benefits.
Cash gifts
Cash or cash vouchers are always taxable and must go through payroll.
Claiming Tax Relief
Most allowable staff party costs and qualifying trivial benefits can be claimed as business expenses, helping you celebrate the season while staying compliant.
Christmas is a great time to recognise your team, boost morale, and celebrate a year of hard work together. The good news? Most annual staff party costs (within the £150 per person limit) and qualifying non-cash Christmas gifts classed as trivial benefits can be claimed as business expenses, helping you keep your celebrations both memorable and tax-efficient.
Just remember: cash gifts and vouchers are always taxable and must be processed through payroll, so planning ahead is key. By following HMRC’s rules, you can enjoy the season without worrying about added tax liabilities for your employees—or your business.
If you’d like expert support checking your Christmas party or gift plans, or want help ensuring your staff benefits are structured correctly, feel free to reach out. We’re here to help you keep your festive season running smoothly. 🎄
