Christmas Expenses for Limited Company Directors: What You Can Claim

The festive season is a great time to reward staff and celebrate the year — and if you run a limited company, there are a couple of tax-efficient expenses you can make use of as a director.

Below we explain the main Christmas-related expenses that HMRC allows, along with the conditions you need to meet to keep them tax-free.

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Staff Christmas Parties and Annual Events

Limited companies can claim a tax exemption for staff Christmas parties or other annual events, provided the total cost does not exceed £150 per person per year (including VAT).

This exemption applies per attendee and can cover more than just the party itself.

HMRC Conditions You Must Meet

To qualify for the exemption, all of the following conditions must be met:

1. It must be an annual event

The event must be a regular annual function, such as:

• A Christmas party
• A summer BBQ

One-off celebrations (for example, a company anniversary) do not qualify under this exemption.

2. It must be open to all employees

The event must be available to all employees.

If your business operates from multiple locations, you can hold separate events for each location, as long as every employee is able to attend one of them.

3. Cost limit: £150 per head per year

• The total cost per person per year must not exceed £150, including VAT
• This includes all associated costs, such as:
  • Food and drink
  • Entertainment
  • Transport
  • Overnight accommodation

⚠️ Important: This is an “all or nothing” exemption

If the cost per head comes to £150.01 or more, the entire amount becomes a taxable benefit in kind. The company would then need to:

• Report it on form P11D
• Pay Class 1A National Insurance

4. Guests are included

Employees can bring guests (such as partners or spouses), but:

• The £150 limit applies per attendee, including guests

5. Sole directors

If you are the only director and employee of your limited company:

• You can attend the event with one guest
• The combined tax-free limit is £300
• All other conditions must still be met

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Trivial Benefits

In addition to a staff party, limited companies can also provide small, non-cash gifts to employees under the trivial benefits rules.

Examples include:

• A bottle of wine
• A box of chocolates
• A small gift voucher

Trivial Benefit Conditions

A benefit qualifies as “trivial” if all of the following apply:

• It costs £50 or less per person
• It is not cash or a cash voucher
• It is not a reward for work or performance
• It is not part of the employee’s contract

Directors of Close Companies

If you are a director of a close company (generally a company run by 5 or fewer shareholders):

• You can receive trivial benefits
• But the total value must not exceed £300 per tax year

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Final Thoughts

When used correctly, Christmas parties and trivial benefits can be a simple and tax-efficient way for limited companies to celebrate the festive season and reward staff.

If you’re unsure whether a planned expense qualifies, or want to check you’re staying within HMRC’s rules, it’s always best to get advice before spending the money.

If you need help or clarification, feel free to get in touch with us.

Happy holidays 🎄