Christmas Parties and Director Gift Rules: What You Can Claim
Introduction
As the festive season approaches, many small businesses start planning staff celebrations and small Christmas gifts for directors. HMRC provides two helpful tax breaks that often get confused:
• The Annual Staff Events Exemption (the £150 per head rule)
• The Trivial Benefits Allowance (often used for director gift vouchers)
Below is a simple guide explaining how each allowance works, whether you can use both, and what to watch out for.
The Annual Staff Events Exemption (the £150 rule)
HMRC allows businesses to claim staff events such as Christmas parties and summer gatherings, as long as certain conditions are met.
What qualifies?
To fall within the £150 per person exemption, the event must be:
1. Open to all employees
Everyone must be invited. It cannot be directors-only or a small selected group.
2. An annual event
Examples include a Christmas party or a yearly summer barbecue.
3. Within £150 per head for the whole tax year
This is an annual total, not a per-event allowance.
Spreading the annual exemption between multiple events
You can have more than one qualifying event, such as:
• Christmas party costing £120 per person
• Summer BBQ costing £20 per person
Together, this totals £140 per head for the year, so both events remain exempt. If the combined total goes over £150 per head, none of the events qualify.
What costs can be included?
• Food and drink
• Entertainment
• Venue hire
• Transport
• VAT
• Any other costs required to run the event
If the event meets all the conditions, it is normally fully tax-deductible without creating a taxable benefit for staff.
Directors and the £300 Trivial Benefits Allowance
Alongside the £150 event allowance, HMRC also allows directors to receive small, tax-free perks under the trivial benefits rule. This is completely separate from the staff event exemption.
Here is how the trivial benefits rule applies to directors.
1. Up to £300 per tax year
Directors of close companies can receive up to £300 worth of trivial benefits each tax year.
2. Each individual benefit must not exceed £50
So for example:
• Six separate £50 vouchers across the year is fine
• One £75 voucher is not allowed
• The total cannot exceed £300
3. It must not be a reward for work
It has to be a genuine small perk.
Christmas gift cards usually qualify as long as they’re not linked to performance.
4. No cash gifts allowed
Vouchers are fine, but they must not be exchangeable for cash.
5. The company must pay for the gift
It can not be paid personally then reimbursed.
Trivial benefits are a simple and legitimate way for directors to give themselves a small tax-free treat at Christmas. Just keep to the £50-per-benefit and £300-per-year limits.
Can You Use Both the £150 Event Allowance and the £300 Director Allowance?
Yes, they apply to different types of expenses, and there is no restriction preventing a director from using both in the same tax year.
For example, a director could:
• Attend a staff Christmas party covered by the £150 Annual Staff Event Exemption, and
• Receive several £50 gift vouchers covered by the £300 Trivial Benefits Allowance
Both sets of benefits are entirely separate in HMRC’s eyes.
Why Understanding These Rules Matters
This time of year often brings extra costs, but it also provides opportunities to make use of allowances that HMRC already provides.
By structuring your celebrations and gifts correctly, you can keep things enjoyable, compliant and tax-efficient.
