Can You Claim Your Staff Christmas Party as a Tax-Deductible Expense?

The festive season is nearly here, and after a busy year of hard work, many businesses are planning a Christmas party to celebrate with their teams. Whether it’s a meal out, a night at the local pub, or a big festive bash, it’s the perfect way to thank your employees and end the year on a high.

But before you start booking, it’s worth knowing what HMRC says about claiming your staff Christmas party as a tax-deductible expense. Yes, it’s possible to get tax relief on your party, but only if you meet a few simple rules.

What HMRC Allows for Staff Parties

HMRC lets you claim tax relief on annual staff events, such as a Christmas or summer party, as long as the event meets the qualifying conditions.

To stay within the rules, your event must be:

✅ Open to all employees
Everyone in your company must be invited, not just certain teams or senior staff. If you have multiple sites, you can hold separate events as long as everyone is included in one of them.

✅ £150 or less per head, including VAT
This £150 limit covers the total cost of the event, including food, drinks, entertainment, and any accommodation or transport. Go even £1 over the limit, and the entire amount becomes taxable.

✅ An annual event
Your Christmas party qualifies as long as it happens once a year. The exemption doesn’t apply to one-off or irregular events.

How to Work Out the £150 Per Head

To calculate the cost per head, take the total cost of your event (including VAT) and divide it by the total number of attendees - both staff and any guests.

Example:
If your Christmas dinner costs £3,000 and 20 staff plus 10 guests attend (30 people total), the cost per head is £100.
✅ That’s within the limit and fully tax-free.

But if the cost comes to £4,800 for the same 30 people (£160 per head), ❌ the entire amount becomes taxable. The £150 rule isn’t an allowance, it’s a limit.

Can You Hold More Than One Event?

You can hold multiple events, like a summer BBQ and a Christmas party, as long as the combined total per person doesn’t exceed £150.

For example:

• Summer BBQ: £80 per head

• Christmas Party: £60 per head
  ✅ Total = £140 (both events tax-free)

If the combined total exceeds £150, you can choose which event to claim tax relief for, but not both.

What You Can Claim

You can include the following costs within the £150 limit:

• Food and drink

• Venue hire

• Entertainment (DJ, live music, etc.)

• Transport and accommodation

If your business is VAT-registered, you can also reclaim VAT on the costs, provided the event is for staff only. If clients or partners attend, their costs are not eligible for VAT reclaim.

What Happens If You Go Over the Limit

If your event exceeds the £150 per head limit, the full cost becomes a taxable benefit. That means:

• Employees may have to pay income tax on their share

• Your business must pay National Insurance on it

• The cost cannot be claimed as a tax-deductible expense

It’s best to plan ahead and keep your budget just under the limit to stay compliant and avoid any nasty surprises.

Keeping Records for HMRC

Make sure to keep:

• All invoices and receipts for the event

• A list of attendees

• Clear calculations of the per-head cost

If HMRC ever asks for evidence, these records will show that your event meets the exemption criteria.

When to Ask for Advice

If you’re unsure whether your event qualifies, it’s always best to get professional advice before the party. A quick chat with your accountant can confirm whether your costs fall within HMRC’s rules and how best to record them for your year-end accounts.

The Bottom Line

A Christmas party is a brilliant way to thank your team and build morale, and if you follow the rules, HMRC will even help you pay for it.
Keep it open to everyone, make sure it’s £150 or less per head, and hold it as an annual event. Stick to those rules, and your party can be both fun and fully tax-deductible.

Need help working out what you can claim?
At Rhombus Accounting, we help businesses across Yorkshire stay compliant and make the most of their allowable expenses. Speak to our team before you book… we’ll make sure your celebration stays stress-free (for both you and your tax return).

Meet Lewis

Lewis is a professional accountant and founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.

Book a call today to learn more about what Lewis and Rhombus Accounting can do for you.