All I want for Christmas is a Staff Christmas party …
With the holiday season fast approaching, many employers are planning ways to reward their teams for a year of hard work.
A popular choice is hosting a Christmas party, which can be tax-exempt for your employees under specific conditions. The tax exemption applies annually, meaning businesses can organise both a summer event and a Christmas celebration, provided the combined cost remains under £150 per head. However, exceeding this limit—even by a penny—means the entire amount becomes subject to income tax and National Insurance.
1. Invite Everyone—Naughty or Nice
To qualify for the tax exemption, the event must be open to all employees at a specific location. For instance, if your business operates in London and Cardiff, you can hold separate parties for each office, as long as all employees at the location are invited.
2. Celebrate Generously, but Stay Under £150 Per Head
There’s no need to report a benefit in kind for your employees if the total cost of the event is under £150 per head. This figure covers everything—guests, food, drinks, transport, and accommodation—so make sure to account for all expenses, including plus ones.
If you exceed the £150 threshold, the entire amount becomes taxable, not just the excess, so it’s essential to stay within budget and track costs carefully.
3. Spread the Cheer Year-Round
The exemption isn’t limited to a single event. You can claim it across multiple occasions, as long as the total cost for the year stays under £150 per head. For example, a £70 summer BBQ and an £80 Christmas party would both qualify for the exemption.
4. What If Costs Go Over £150 Per Head?
If spending exceeds the limit, the portion attributed to each employee (and their guests) must be reported on their P11D forms, meaning they’ll pay tax on it as a benefit. To prevent this, employers can arrange a PAYE Settlement Agreement with HMRC, allowing the business to cover the tax and National Insurance on behalf of employees.
5. Santa’s Rules for Gifts
Employees can also enjoy tax-free gifts, provided each gift costs less than £50 (including VAT) and isn’t cash or a voucher.
By planning carefully, you can ensure your team enjoys festive celebrations and thoughtful gestures, all while keeping them—and your budget—happy.
