Are Christmas Parties Tax-Free?
The annual Christmas party is a great way to have fun and show your employees that you appreciate all their hard work over the year. But what about Christmas party tax considerations?
No one wants to pay more tax than they should be, especially when it comes to the annual party. Here's what you need to know about throwing a tax-free work party to make the most of your tax exemptions.
The Christmas Party Is Exempt
The good news is that the annual Christmas party is tax-exempt. This does not mean it is a tax-free allowance, which is explained clearly on the Gov.uk website. However, there are several requirements that you must stick to in order for it to be exempt.
Maximum Price Per Head
The first and most important consideration is that there is a maximum amount you can spend on each person attending, which is currently £150 including VAT.
Remember, when it comes to Christmas party tax, this is an exemption and it is not an allowance. So if you go over £150, you cannot claim it as a business expense.
Only for Annual Events
For your Christmas party to be tax-exempt, it must also be an annual event. A Christmas party is typically an annual event, so this should be fine.
Must Be for All Employees
When you are planning your Christmas party, remember that it must be open to all the employees at the company, so make sure everyone is invited!
What if you have different locations? That's fine as long as all the employees at each location are invited to their respective parties. You can also hold different parties for different departments, but everyone must be invited to at least one event.
What About Multiple Events?
You can also have multiple annual events. For example, you might want to hold a summer party and a Christmas party. Just remember that the £150 rule still applies to the whole year.
So if you have a summer party at £70 a head and a Christmas party at £75 a head, this would be a total of £145 a head, so it would be exempt. You can hold a tax free work party at different times of the year as long as the combined costs are under £150 a head.
Partners and Family Members Are Included
Your employees may want to invite someone to the party, and this is fine. Each employee can invite one person, who must be a family member or partner, and the £150 limit is per head, not per employee.
Ask Us for More Info
We can provide you with advice about your Christmas party tax issues and other annual events and tax exemptions. We provide specialist business tax advice on all matters, including tax-efficient savings and investments.
So if you are planning a tax-free work party, get in touch for more information, and start planning your Christmas party in the most tax-efficient way possible.