Christmas Celebrations: Our Expenses Guide (Updated for 2026)

For Franchisees and Small Business Owners

Christmas is a great opportunity to celebrate with your team - but with parties, gifts and festive spending comes the important question: What can your business actually claim?

HMRC’s rules for staff events and gifts remain in place for 2026/27, and understanding them can help you reward your team tax‑efficiently and avoid unexpected costs. Visit the government website for more information.

Here’s what you need to know.

The £150 Christmas Party Rule

Your annual Christmas party can be completely tax‑free for employees if it meets HMRC’s annual function exemption. To qualify, the event must:

• Be an annual event (e.g., Christmas party, summer BBQ)
• Be open to all employees (or all employees at a specific location)
• Cost £150 or less per person, including VAT

The £150 limit must include everything associated with the event, including:

• Food and drink
• Venue hire
• Entertainment
• Transport
• Overnight accommodation

Cost per head calculation: Total event cost ÷ total number of attendees (including guests)

⚠️ Important - £150 is a limit, not an allowance.
If your event costs £151 per person, the entire event becomes taxable - not just the extra £1.

Guests (family members or partners) can attend, but they must be included in the cost‑per‑head calculation.

If You Have More Than One Staff Event

The exemption is not £150 per event - it is £150 per person per tax year.

This means:

• You can split the exemption across multiple annual events
• The combined cost must stay within £150 per person

Example:

• Summer party: £70 per person
• Christmas party: £75 per person
• Total: £145 per person - both events qualify

If the combined cost exceeds £150 per person, you must choose which event(s) to treat as exempt, provided their combined cost remains within the limit.

Think of it as: One £150 annual exemption - not £150 for Christmas plus £150 for summer.

Christmas Gifts & Trivial Benefits

Small gifts to employees may qualify as trivial benefits if they meet all conditions:

• Cost £50 or less
• Not cash or cash‑redeemable
• Not a reward for work or performance
• Not contractually required

Directors of close companies

Directors have an annual cap of £300 for trivial benefits.

Record Keeping: What You Must Keep

To stay compliant, keep evidence of:

• Total cost of the event
• Number of attendees
• Cost‑per‑head calculation
• Invoices and receipts
• Details of employee gifts and trivial benefits

HMRC has recently emphasised record‑keeping through updated employer guidance and webinars covering trivial benefits, travel expenses and social functions.

✨ Key Takeaway

Christmas parties and festive gifts can be a tax‑efficient way to reward your team - but only if you follow the rules carefully.

• Stay within the £150 per‑person annual limit
• Use the £50 trivial benefit correctly
• Keep clear records
• Plan early to avoid the “£151 per head” trap

If you want us to review your plans or check whether your event qualifies, the dt group team is here to help. Just get in touch and we’ll take care of the rest.