Company Christmas parties – what are the tax rules?

A Christmas party is not only an enjoyable way of rewarding employees, but it can also be tax-efficient. According to HMRC rules, employees and their partners do not pay tax and national insurance on any parties they attend so long as the cost to the business is less than £150 per head.

The cost of the function is calculated including VAT and also any extras such as transport or overnight accommodation. The total cost of the function is then divided by the total number of people attending, including non-employees in order to arrive at the cost per head.

If the cost per head of the Christmas party is greater than £150, then the whole cost will be subject to tax and NI. For example, if the cost of the party, transport and accommodation averages out to £200 per head, then the employee is taxed on £200.  If their partner also attended, then they would be taxed on a benefit of £400.

At CHW Accountants we can help you calculate how much tax and NI you’ll pay based on how many guests you intend on inviting.

Another scenario which influences how tax and NI is applied to events is if you as an employer provides more than one party per year.

If three parties were held over the course of the year costing £110, £40 and £75 per head respectively, then tax and NI would be levied on the £75 party only because the £110 and £40 parties would be covered by the £150 annual exemption.

For more advice please get in contact.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

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