Or – what’s the tax position for Christmas gifting, parties and HMRC in 2026?
Saying thank you, celebrating with your team and showing appreciation to the clients and suppliers who support your business – that time of festive cheer is coming around again.
But before you start filling hampers, booking the party venue or writing cards, it is worth knowing where the tax rules sit. A little planning now can help you enjoy the festive season without an unexpected tax bill in the new year.
It’s a question we get every year, so here’s our simple guide to staff gifts, the Christmas do and gifts for clients. Almost as handy as a free branded calendar for 2027.
Staff gifts: festive cheer without the tax worry
If you would like to give your team a small Christmas gift to thank them for their hard work, you may be able to do this tax-free under HMRC’s trivial benefits rules.
A hamper, flowers, a bottle of something nice or a non-cash voucher can qualify, as long as it:
- Costs £50 or less, including VAT
- Isn’t cash or a cash voucher
- Isn’t part of the person’s contract
- Isn’t a reward for a particular job or for how well they’ve worked
Tick all four and your employee shouldn’t pay tax or National Insurance on it. You can also usually claim the cost as a business expense, so it comes off your profit before tax is worked out.
One thing to watch: £50 is a cliff edge. If a gift costs even a penny over, the whole thing can become taxable, not just the bit over the limit.
You can give employees more than one of these small gifts across the year. But if you’re giving them to directors of your own limited company, or other office holders, there’s a cap of £300 per person for the tax year.
Christmas parties: celebrate, but watch the £150
A Christmas party is a great way to thank the team, and there’s a separate tax break that can help.
If your annual staff party costs £150 or less per head, including VAT and extras like taxis or a hotel room, it can be tax-free for your employees, and you can claim the cost as a business expense. It has to be open to all your staff though, not just you and a few of the senior people.
You can invite partners and plus-ones too. The £150 limit covers everyone who turns up, so add their costs to your sums.
Again, it’s the total per head that counts. Hit £150.01 and the whole lot can become taxable. You could lose the tax relief, and your people could end up with a tax bill on the night out.
A quick word on VAT: you may be able to claim back VAT on the staff part of the party, but usually not on partners or ex-employees. If you invite guests, split the VAT properly in your records.
Client gifts and entertaining: be generous, but plan carefully
You may also want to spread a little Christmas cheer among key clients and suppliers. That is a lovely gesture, but the tax treatment is different.
If you invite clients or suppliers to the Christmas do, HMRC treats that as client entertaining. That means:
- You usually can’t claim the cost as a business expense
- You can’t normally claim back the VAT
That’s true even if they join in with your staff party. The best thing to do is keep good records and separate what you spent on your own people from what you spent on clients and suppliers.
If you’d like to send gifts instead, some promotional ones can still get tax relief. Generally, the gift needs to be either:
- A free sample of what you sell, or
- Something with a clear advert for your business on it, like a branded mug, notebook or pen
It also has to cost £50 or less per person across the tax year. Food, drink, tobacco and vouchers don’t count, because HMRC sees those as entertainment rather than promotion. So that bottle of whisky for your best client won’t get the relief.
The same £50 matters for VAT. If gifts to one person stay under £50 in a 12-month stretch, you may be able to treat them as outside VAT altogether. Go over, and VAT may be due, or you could lose the right to claim it back.
Christmas cards: a simple tax-friendly gesture
Good news: cards are usually a safe bet. As long as they carry your business name, cards to clients, contacts or suppliers can generally be claimed as an everyday business expense: a simple, thoughtful way to keep in touch with no tax headache.
A little planning goes a long way
Christmas should be about thanking your team, looking after the people who support your business and having a well-earned break, not worrying about tax.
Keep an eye on the £50 gift limit, the £150 party limit and the rules on client entertaining, and you can enjoy the season without a nasty surprise from HMRC in the new year.
Not sure how the rules apply to what you’ve got planned?
Give us a shout before you book anything. We’ll help you sort your gifts and celebrations the smart way. Contact us at letschat@bean-sprout.co.uk