Christmas Parties and Gifts: What’s Tax-Deductible for Your Business?
Chrissy Leach • 3 November 2025
As the festive season approaches, many business owners start thinking about rewarding their team - or themselves - with Christmas parties and gifts. But what can you actually claim as a business expense? And how do the rules differ if you’re self-employed or running a limited company? Here’s a simple breakdown so you can celebrate without a tax hangover.
🎉 Christmas Parties: What You Can Claim
Limited Companies
HMRC allows a staff event to be treated as an allowable expense if it meets all three of these conditions:
- It’s an annual event – such as a Christmas party or summer BBQ.
- It’s open to all employees – not just directors or selected staff.
- It costs £150 or less per head (including VAT) – this includes food, drink, entertainment, transport, and accommodation.
✅ If all three apply, there’s no tax or National Insurance for the company or employees.
❌ If you go over £150, the whole amount (not just the excess) becomes taxable as a benefit in kind.
You can invite guests to your Christmas party, but be careful not to invite clients, suppliers or referrers as it may end up as disallowable entertaining. It’s probably best for the invitees to be your employees and a plus one.
💡 Tip: You can have more than one annual event (e.g. summer BBQ and Christmas party) - just make sure the combined total per head stays within £150.
Self-Employed (Sole Traders)
Unfortunately, the £150 staff party exemption doesn’t apply to sole traders or partners if you’re the only person in the business. HMRC doesn’t consider entertaining yourself a business expense.
However, if you employ staff, you can claim the cost of a staff Christmas event on the same £150 per head basis.
🎁 Christmas Gifts: What You Can and Can’t Give
Client Gifts
You can only deduct the cost of client gifts if all of the following apply:
- The total cost is £50 or less per client per year
- The gift promotes your business (e.g. branded notebooks, mugs, or calendars)
- It’s not food, drink, or tobacco (unless it’s a promotional sample)
Employee Gifts
If you want to give your team something extra this Christmas, you can make use of the trivial benefits rule. You can give employees (including directors) a non-cash gift if:
- It costs £50 or less (including VAT)
- It’s not cash or a cash voucher
- It’s not a reward for work or performance
- It’s not part of their contract
✅ Examples: A Christmas hamper, gift card (non-cash), or bottle of wine.
❌ Not allowed: A £50 bonus paid through payroll, or a reward for hitting sales targets.
For directors of close companies (typically where there are five or fewer shareholders), there’s a £300 annual cap on trivial benefits in total per director.
Don’t Forget VAT
If your business is VAT-registered, you can usually reclaim VAT on the cost of staff parties and gifts, as long as they’re for employees only and not for clients or family members.
VAT on entertaining non-employees (including partners, clients, or spouses) cannot be reclaimed.
Final Thoughts
The Christmas season is a great opportunity to celebrate your team’s hard work, and it doesn’t have to come with an unwelcome tax bill. With a bit of planning, you can stay within HMRC’s exemptions and make the most of your festive budget.
If you’re unsure whether your party or gifts qualify, CJL Accountancy can help you review your plans and make sure you’re claiming everything correctly.
👉 Get in touch
before the year-end so we can help you make the most of your Christmas spend!
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