The Secret to a Tax-Free Christmas Party!

If your Christmas party costs more than £150 per head, HMRC could be celebrating too.  Did you know that HMRC provides an annual allowance to make team events tax-free?

Many business owners assume events are just another expense, meaning some will skip them altogether. Others go all in, only to discover later that they have triggered an unexpected tax bill. However, used correctly, the allowance lets you reward your team, build morale and keep more money in your business.

HMRC allows £150 per head, tax-free, per employee, per year. This covers the full cost of the event, including food, drinks, travel, entertainment and even hotel accommodation. The only thing you need to watch is the limit.  If you go over, even by £1, the whole amount becomes taxable, not just the extra bit.

To keep things simple:

• The total cost, including VAT, must stay within £150 per person
• The event must be open to the whole team, not just a select group
• You can use the allowance on one big event or split it between two smaller ones
• Directors, including sole directors, can use the allowance too
• You can also invite spouses or partners as guests

Here is an example. You run a small company with seven employees. You book a local venue at £100 per person, enjoy a festive evening and stay comfortably inside the rules. No tax, no stress. Plus, if you want to keep the goodwill going, you still have £50 left to put towards a summer barbecue!

It is one of the easiest tax-efficient perks of the year, and a simple way to boost team culture without overspending. Plan your party right and make the most of it!