Staff Christmas Parties and Trivial Benefits: Tax-Free Rewards for UK Businesses
Plan festive rewards without a tax bill. How the £150 annual event exemption and £50 trivial benefits rules work for employees and company directors.
It is worth planning end-of-year rewards now. Used correctly, two HMRC exemptions let you thank your team — and yourself as a director — without extra tax or National Insurance.
1. The annual staff event exemption (£150 per head)
A Christmas party or summer event is tax-free for employees if:
- The total cost is £150 or less per attendee (including VAT, food, drink, transport and accommodation)
- It is open to all employees (or all at one location)
- It is an annual event, not a one-off
The £150 is an allowance, not a deduction — go £1 over and the whole amount becomes taxable. You can split it across events (e.g. summer BBQ and Christmas meal) as long as the combined total stays under £150. Sole directors of one-person companies can still qualify where the event is genuinely for staff.
The cost is normally a deductible expense for Corporation Tax, and VAT on staff entertainment can usually be reclaimed (but not for guests who are not employees).
2. Trivial benefits (£50 per gift)
A benefit is tax-free if it:
- Costs £50 or less (including VAT)
- Is not cash or a cash voucher
- Is not a reward for work or performance
- Is not in the employment contract
Examples: a Christmas hamper, a bottle of wine, a meal voucher for a birthday.
The director cap
Directors of close companies (most owner-managed companies) are limited to £300 of trivial benefits per tax year. Family members who are employees can also receive trivial benefits, though their gifts count towards the director's cap if they are not themselves employees.
Don't forget the paperwork
Record dates, attendees and costs. If you go over a limit, report it via a PAYE Settlement Agreement or P11D. See our guide to the true cost of employing staff.
Questions about rewarding staff tax-efficiently? Speak to our team.