Allowable expenses during the festive period

Annabel Barnes • 15 November 2023

Allowable expenses during the festive period

We’re just over a month away from Christmas and you’ve probably been planning your Christmas party for a while now. But does the cost of the party qualify as a tax deductible expense?

Will you be buying gifts for clients and employees? Read on to find out more what qualifies as an allowable expense against your tax bill.

How much can I spend?

Under HMRC’s regulations the limit of how much you can spend on entertaining your employees is £150 per person. This amount can be spread across the year for various events but cannot exceed the amount of £150 per head. This does not apply to freelancers and subcontractors, only people employed by the business.

Despite what many business owners believe, client entertainment is not a tax deductible expense. If you do decide to treat your clients to some hospitality this Christmas then I’m afraid you can’t claim it as a business expense.

If you’re wanting to treat your employees to a gift this Christmas then the value must not exceed £50 per person. This doesn’t mean you can buy a gift for £60 and just claim back £50. If the value exceeds £50 then the whole gift no longer qualifies as a tax deductible expense, so budget accordingly!

The same applies for client gifts; the limit is £50 per person.

What gifts can I buy?

You can buy your employees gifts such as; a bottle of wine, a box of chocolates or a voucher, but you can’t give them a cash gesture.

If you’re a director on payroll then you qualify too, so treat yourself to something under the value of £50 this Christmas!

Client gifts are a little different. In order for them to qualify as a tax allowable expense they must be branded with your logo and must not contain tobacco or alcohol.

Hopefully this gives you a better understanding of employee and client entertainment and gifts this Christmas. If you’re unsure of anything please do run it by your bookkeeping or accountant first.

Have a great Christmas!

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