It’s that time of year when most employers arrange a Christmas Party for their staff.  The rules around tax relief for Christmas parties are fairly generous so long as the party is open to all employees and not just directors/management.

  • Party costs (including travel etc.) are fully tax deductible if they are no more than £150 (inc. VAT) per head (including guests).
  • Be careful. If, say, £200/head is spent, then the Employer will need to pay PAYE and National Insurance on the total party cost of £200/head – not just on the excess £50/head.
  • The £150 is an annual limit so would cover a Summer Party and a Christmas Party in the same tax year. But, if the costs of multiple parties exceed £150/head, then an Employer could use the £150/head limit to cover the most expensive party, and only pay PAYE/NI on the other one.