It’s that time of year when routines go out the window, the biscuit tin becomes a legitimate breakfast option, and everyone pretends Bailey’s in a coffee is perfectly normal at 10am.
The only thing that seems to get more complicated at Christmas is the gifts.
I actually like buying them, which only adds pressure, and then HMRC pop up to make sure even Christmas comes with rules.
So here’s the simple, no-drama version of what you can and can’t do when gifting staff and clients this year. Think of it as the tax equivalent of a strong flat white: straightforward, keeps you awake, and stops disasters.
Gifts under £50 (including VAT) usually qualify as a trivial benefit. No tax, no National Insurance, no headaches. The catch: it can’t be cash, a voucher, or a reward for doing their job. So no “Thanks for the overtime, here’s a candle.”
Directors and office-holders have a £300 annual cap on these trivial benefits, total, not per gift, and that includes anything given to family members.
If the gift is £50.01, HMRC doesn’t say, “Close enough.” The whole amount becomes taxable. They love that rule.
Cash bonuses must always go through payroll. There’s no festive loophole.
If you want something nice that avoids tax entirely, giving people a half-day off or arranging a team charity afternoon is the easiest win. Good for morale, costs nothing extra, and HMRC can’t argue with it.
If you want the cost to be tax-deductible (and to reclaim VAT), the gift has to be under £50 and actually promote your business. That means your branding on the item itself, not the bag someone throws away immediately.
Multiple gifts to the same person in the same accounting period can break the £50 rule, so be sensible.
Anything over £50, or anything you’d personally enjoy - like wine, chocolates or anything nice, basically, isn’t tax deductible
Staff Christmas parties are tax-free if they cost less than £150 per head, including VAT, transport and accommodation, and are open to all employees.
Go even slightly over £150 and the whole thing becomes taxable. HMRC don’t do “close enough” at Christmas, apparently.
Client entertaining is never tax-deductible. No VAT reclaim either. That’s just the law, not me being miserable.
So there you go - the sensible, HMRC-proof way to keep things festive without causing yourself a January headache.
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.
