It’s the festive season, and what better way to thank your team for their hard work than with a Christmas party? While everyone loves a good celebration, as a business owner, you may be wondering: Are Christmas party expenses tax deductible?

The short answer is yes, but there are important rules and thresholds to keep in mind. Let’s break it down:

Claiming Back Christmas Party Expenses

HMRC allows businesses to claim back the full cost of their staff Christmas party against their company profits. This means you can reduce your Corporation Tax bill while spreading some festive cheer.

The £150 Per Head Rule

The key figure to remember is £150 per head. This includes:

• All expenses related to the event, such as venue hire, catering, and entertainment.
• The total cost divided by the number of attendees (including non-employees like plus-ones).

If the cost per head stays at or below £150, the expense is entirely deductible, and there are no additional tax implications.

What Happens If You Exceed £150 Per Head?

If the cost per head exceeds £150, the entire amount, not just the excess, becomes a taxable benefit.

• Payroll Obligations: You’ll need to process the expense through your payroll for each employee, which may lead to additional Income Tax and National Insurance contributions.
• Careful Planning Required: To avoid these extra costs, keep a close eye on your budget and attendee numbers to ensure you stay within the limit.

Make It a Festive Win-Win

A Christmas party is a great way to boost morale and celebrate success, but it pays to plan strategically. Staying within the £150 per head threshold not only saves your business money but ensures the party remains a tax-efficient perk for your team.

Get the Business You Want

If you’re unsure about the rules or need help navigating your Christmas party expenses, our team at Carthy Accountants is here to help. We’ll make sure you’re making the most of every deduction while staying compliant with HMRC guidelines. At Carthy Accountants, we’re here to help you get the business you want. Get in touch today.