Christmas Party Expenses: What UK Businesses Can Claim in 2025

As Christmas approaches, many UK businesses start planning festive celebrations for their teams. But the big question that comes up every year is the same: what can you claim as an allowable business expense?

HMRC does allow businesses to claim the cost of staff parties and certain seasonal gifts, but only if the rules are followed. This guide breaks down everything UK employers need to know for Christmas 2025.

Are Christmas Parties Tax-Deductible for UK Businesses?

Yes. Christmas parties can be tax-deductible, but only if you meet HMRC’s “annual event exemption”. This applies to staff entertainment and means no tax or National Insurance is due on the benefit provided to employees.

To qualify, you must meet all three of the conditions outlined below.

HMRC’s Annual Event Exemption: The 3 Rules You Must Follow

1. It must be an annual event

Examples include:

• Christmas parties

• Annual summer events

A one-off event (e.g., celebrating a new office) does not qualify for the exemption.

2. It must be open to all employees

The event must be available to:

• All employees, or

• All employees in a specific location (e.g., “the London office”)

Events only for directors or only for one team do not qualify unless you genuinely have only one employee.

3. It must cost no more than £150 per head

This limit is inclusive of VAT and applies per tax year. The £150 per head allowance can cover:

• Food

• Drink

• Entertainment

• Venue hire

• Transport

• Overnight accommodation

Important: £150 is an exemption, not an allowance. If the total costs come to £150.01, the whole amount becomes a taxable benefit.

How to Calculate the £150 Per Head

HMRC requires you to divide the total cost of the event by the number of people who attend, including guests.

Example

• Total cost of party: £3,000

• Attendees: 20 employees + 10 guests = 30 people

• £3,000 ÷ 30 = £100 per head. This is within the £150 exemption.

If guests are invited, that’s fine. The cost per head still counts.

Can You Have More Than One Staff Event?

Yes, but only up to the total value of £150 per tax year.

For example:

• Summer BBQ: £60 per head

• Christmas party: £80 per head

• Total: £140, so both events qualify.

But:

• Summer BBQ: £80 per head

• Christmas party: £100 per head

• Total: £180, so you must choose one to exempt and the other becomes a taxable benefit. Many employers choose to exempt the most expensive event to maximise relief.

Are Christmas Gifts to Staff Tax-Deductible?

Yes, many small seasonal gifts qualify under HMRC’s Trivial Benefits rules.

To be exempt:

• The gift must cost £50 or less

• It can’t be cash or a cash voucher

• It cannot be a reward for performance

• It must not be part of the employee’s contract

Examples that are allowed:

• Christmas hampers (under £50)

• Chocolates, wine, flowers

• Gift cards (as long as they are not exchangeable for cash)

Examples not allowed:

• Bonuses

• Store vouchers that can be exchanged for cash

• Gifts above £50 (the whole amount then becomes taxable)

Are Gifts to Directors Allowed?

Yes, but with limits. Directors of “close companies” (most small Ltd companies) have an annual trivial benefit cap of £300 per tax year per director. This can be made up of several £50-or-less gifts.

Can You Claim Client Christmas Gifts?

Yes, but only if the gift is:

• Less than £50

• Promotional

• Carrying clear and lasting branding (e.g. your company logo)

• Not food, alcohol, or tobacco

A branded diary or mug qualifies. A bottle of wine or chocolates does not.

Are Virtual Christmas Parties Still Allowed as a Tax-Free Event?

Yes, HMRC still accepts virtual events under the annual event exemption.

You can claim costs such as:

• Food and drink delivered to employees

• Online entertainment or workshops

• Event packs or gift boxes

The same £150 per head rules apply.

What Businesses Can Claim at Christmas: A Quick Summary

Expense Type	Allowable?	Conditions
Staff Christmas Party	Yes	Annual event, open to all, under £150 per head
Multiple Staff Events	Yes	Total combined cost under £150 per head
Staff Gifts	Yes	Under £50, not cash, trivial benefit rules
Director Gifts	Yes	Under £300 annually (multiple trivial benefits)
Client Gifts	Sometimes	Must be promotional and under £50
Director-only Christmas Party	No	Unless the director is the only employee

Final Thoughts

HMRC’s rules around Christmas expenses can be surprisingly generous, but only if you understand the limits. Staying within the £150-per-head allowance ensures your festive celebrations remain tax-free for both your business and your team.

If you’d like help planning tax-efficient staff events or understanding which festive expenses you can claim, Highway 61 is here to help. Get in touch today to find out more.