Business News

Planning Your Office Christmas Party? Here's How to Make It Tax-Friendly.

17/11/2025

As the festive season approaches, it’s a great time for directors of limited companies to celebrate with their teams - and there’s a handy tax exemption from HMRC that can help you do it smartly.

Here’s a simple breakdown of how it works:

What’s Allowed?

HMRC lets you claim up to £150 per person per year (including VAT) for annual staff events like a Christmas party or summer get-together. This can cover:

• Food and drink
• Transport
• Overnight stays
• Entertainment

You can even include a plus one (like a spouse or family member), which means up to £300 total for two people.

Key Rules to Keep in Mind

• The event must be annual (not a one-off).
• It must be open to all staff – not just directors or shareholders.
• If you go over £150 per person, the whole amount becomes taxable, not just the excess.
• You can split the £150 across multiple events, but the total per person must stay within the limit.

Virtual Parties Count Too!

If you’re hosting a virtual party, that’s fine – just make sure it’s a real event. Sending out hampers is a nice touch, but they must be part of an actual gathering. A hamper on its own doesn’t qualify for the exemption (though it might fall under the trivial benefits rule instead).

What About Sole Directors?

Good news! Sole directors can still claim the exemption for themselves and a guest, as long as all the usual rules are followed.

Claiming the Costs

To recover your party expenses:

• Record them as a tax-deductible business expense.
• If everything’s in line with HMRC rules, it’ll reduce your corporation tax.
• The event will also be exempt from income tax and National Insurance.

Reclaiming VAT

You can reclaim VAT on party costs if employees attend. But if it’s just directors and their partners, VAT can’t be reclaimed.

Final Thoughts

With a little planning, you can enjoy a festive celebration and make the most of the tax benefits available to your company. If you’re unsure about the details or want help setting things up, we’re here to guide you.

As always do get in touch if you would like to discuss anything