Can I Claim a Christmas Party as a Business Expense?
If You Have Employees: Yes, Within Limits
The annual staff party exemption allows you to spend up to £150 per head per year on annual events for your employees, and the cost is:
- Tax-deductible for your business
- Not a taxable benefit for your employees
The conditions are straightforward:
- The event must be open to all employees (or all employees at a location)
- The total cost per head must not exceed £150 (including VAT, food, drink, entertainment, transport, and accommodation)
- The £150 is per person per year — it covers all annual events combined
Important: £150 is an exemption, not an allowance. If the cost per head comes to £151, the entire amount is taxable — not just the £1 excess.
Can Partners and Spouses Attend?
Yes. Partners and spouses can attend the event, and their costs count towards the per-head calculation. If the event costs £100 per person and each employee brings a partner, the cost is £100 per head — still within the £150 limit.
Sole Traders Without Employees
If you're a sole trader with no employees, you cannot use the annual party exemption to claim a Christmas dinner or party for yourself. You're not your own employee, and entertaining yourself is personal expenditure.
However, if you have even one employee (including a spouse who genuinely works for your business), the exemption applies.
Multiple Events
The £150 covers all annual events in the tax year — not per event. If you hold both a Christmas party (£100 per head) and a summer barbecue (£60 per head), the total is £160 per head, exceeding the £150 threshold.
In this scenario, you can choose one event to be exempt and treat the other as a taxable benefit — pick the more expensive one to exempt.
Client Christmas Entertaining
Taking clients out for Christmas drinks or dinner is client entertainment — not covered by the annual party exemption and not tax-deductible.
Plan your staff events within the £150 limit. With Accounted, Penny tracks your staff entertainment costs and alerts you if you're approaching the threshold.
Keep your festive expenses in order. Start your free trial today.
Tax & Compliance Specialists
Our tax specialists have decades of combined experience in UK sole trader and small business taxation, MTD compliance, and HMRC submissions. All content is reviewed against current HMRC guidance before publication and updated quarterly to reflect legislative changes.
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