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How to Reward Staff at Christmas Tax-Efficiently | Fairfax Tax & Accounts
The Season of Celebration and Gratitude
As the festive season draws near, it’s the perfect time to celebrate, reflect, and show appreciation to the people who make your business shine. Recognising your team’s hard work doesn’t just lift morale — it strengthens loyalty and builds a positive working culture that lasts long after the decorations come down.
From office parties to thoughtful gifts, there are plenty of ways to spread some cheer — and with the right planning, you can ensure your generosity remains tax-efficient.
🎉 Christmas Parties – Fun and Fully Deductible
For many businesses, the annual Christmas party is a highlight of the year — and the good news is that HMRC allows tax relief on staff entertainment, with input VAT reclaimable on qualifying costs.
To qualify as a tax-free benefit, your event must meet the following conditions:
✅ It’s open to all employees.
✅ It’s an annual social function (such as a Christmas party or summer BBQ).
✅ The total cost does not exceed £150 per person, including VAT, travel, and accommodation.
💡 Important: The £150 limit is a threshold, not an allowance. If your event costs even £151 per head, the entire amount becomes taxable — not just the excess.
You can spread the exemption across two annual events (for example, a £130 Christmas party and a £40 summer event), as long as the combined total stays within £150 per person in a tax year.
If your business operates across multiple locations, you can hold separate events — provided all employees have the opportunity to attend one of them.
Always keep clear records of costs and attendee numbers to support your claim.
🎁 Staff Gifts – The Trivial Benefit Exemption
Prefer to show appreciation with a gift instead of (or in addition to) a party? Hampers, wine, or gift vouchers can all qualify for HMRC’s Trivial Benefit in Kind Exemption — meaning no tax or National Insurance for either employer or employee, as long as the following criteria are met:
- The total cost is £50 or less per gift (including VAT and delivery).
- The gift is not cash or a cash equivalent (so bonuses don’t qualify).
- It’s not provided as part of a contract or in recognition of work performed.
- It’s given purely as a goodwill gesture or on personal grounds (e.g. seasonal gifts).
Keeping accurate records will help ensure you meet the exemption requirements.
👑 For Directors – Treat Yourself Too!
If you’re a director of a close company, you can also enjoy tax-free gifts personally under the same Trivial Benefit rules — up to six per tax year, each worth £50 or less.
It’s a simple and perfectly legitimate way to reward yourself for your hard work and dedication throughout the year — think of it as a well-deserved festive perk!
🌟 A Little Planning Goes a Long Way
Whether you’re hosting a party, gifting your team, or combining both approaches, thoughtful planning will ensure your celebrations stay compliant and tax-efficient.
A little preparation now means you can celebrate in style — without any tax surprises later.
If you’d like help making sure your festive spending stays within the rules, our team at Fairfax Tax & Accounts can walk you through the details and help you plan a tax-efficient season of goodwill.
📞 Get in touch today to discuss your plans — and let’s make sure your celebrations are as rewarding as they are festive!