Keeping Christmas Gifts Cheerful and HMRC-Friendly

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 to staff

• 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.

Gifts to clients

• 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

Christmas parties & entertaining

• 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.