All You Need To Know About The Christmas Party Expense Exemption

The HRMC recognises that Christmas parties are a great way to reward your employees for an entire year of hard work. Therefore, no matter the size of your business, you can claim for some Christmas party expenses to be exempt from your National Insurance and tax. As the Limited Company director, you can claim expenses for an annual party, such as a Christmas party, up to a certain amount. Contact Aston Black for advice on any contractor accountancy concerns. If the party meets certain conditions, this amount is exempt from National Insurance and tax.

What Christmas Party expenses can I claim?

To be able to claim, the party needs to be an annual function (such as a Christmas party), and all employees need to be invited. The cost of the party needs to be less than £150 per head (including VAT), but shareholders are not included in the exemption if they aren’t employees or directors. You can also claim an additional £150 per person for a plus one for each employee, providing they are a family member or partner. If you only have one employee (yourself), you can take yourself out to a Christmas meal for upto £150 and receive tax and National Insurance for the relief. However, it’s important to remember this is an exemption, not an allowance. If the cost of the annual event (or Christmas party) is over £150 per head, you will need to claim this on a P11D form, and the expense will be subject to tax and National insurance.

What if I have more than one annual party?

The exemption spans the whole year, so if your company holds more than one function in that time (even if this just includes yourself), you can still claim expenses for the events as long as the functions totalled together do not exceed the amount of £150 per head. For example, if you hold a summer event which costs £50 per head and a Christmas event which costs £100 per head, then both events will be exempt from tax and National Insurance as the sum total per head does not exceed £150. If the sum of both events were larger than £150, only one function under the amount of £150 would be eligible to be exempt.

To calculate the cost per head for your Christmas party, simply add up the total cost of the event and divide it by the number of people who attended. Contact us for tax advice on your limited company. We offer unlimited support and advice on your limited company on a range of topics including company tax, personal tax, VAT and expenses.