Tax-free Xmas Party
HM Revenue and Customs are sharing their festive cheer with employers for another year by offering a tax exemption on Christmas parties – but with limitations.
For your Christmas party to be tax-free, it must be an annual function open to all employees, and only up to £150 can be spent per head. If you spend as little as a penny over this limit, you will be expected to pay tax on the whole amount and not just the overspend.
The tax-free limit includes all expenditure – including the cost of entertainment, food and hired coaches, plus the number of guests can include non-employees such as partners.
It’s also worth noting that the limit applies for a tax year - so if your summer party and Christmas lunch together amount to less than £150 per head, both will be tax-free for employers.
Anita Monteith of the Institute of Chartered Accountants in England and Wales (ICAEW) Tax Faculty explains:
It has been a tough time for many businesses and staff are probably in need of having their spirits raised. Having a Christmas party is a real morale-booster and rewards the hard work that staff put in over the year. It is a good way for businesses to show appreciation for their employees' contributions and encourages their commitment and ongoing efforts.
If organisations play by the rules, they will make savings on their events bill and raise the spirits of their workforce.