Staff Christmas Parties and Tax – The £150 Rule Explained
Every year, as Christmas party planning starts, the same question comes up again and again:
Is the £150 staff party allowance per event, or per year?
It’s an easy one to get wrong, and HMRC’s wording doesn’t help. This blog sets it out clearly, with separate sections for sole traders and limited companies, so you know exactly where you stand.
The £150 rule in plain English
The £150 allowance is:
- £150 per person
- Per tax year (6 April to 5 April)
- Not per event
- Including VAT
It applies to staff social events such as Christmas parties, summer events, or similar functions.
You can hold more than one event in the year, but the total cost per person across all events must not exceed £150.
The £150 annual limit follows the UK tax year, running from 6 April to 5 April, not the calendar year or company year end.
If the limit is exceeded, the entire amount becomes taxable, not just the excess over £150.
Sole traders
Sole traders with employees
If you are a sole trader and you employ staff, you can provide staff social events within the £150 per person annual limit.
Key points:
- The £150 limit applies per employee, per tax year
- The cost can include food, drinks, venue hire, entertainment and transport
- There is no tax or National Insurance if the £150 limit is not exceeded
- You can attend the event yourself as part of a genuine staff event, not a personal meal
- Non staff (partners, friends, children) must be excluded from the cost calculation
If the total cost per person goes over £150 for the year, the whole amount becomes taxable.
Sole traders without employees
If you are a sole trader with no employees, staff entertaining rules do not apply.
In this situation, a meal or event for yourself would be treated as personal expenditure and is not an allowable business cost, even if it feels like a “business Christmas do”.
Limited companies
Limited companies are often where the confusion increases, especially when directors are involved.
The good news is that:
- Directors are treated as employees for this purpose
- The £150 per person, per tax year allowance applies to directors and staff
Provided the £150 limit is not exceeded:
- The cost is corporation tax deductible for the company
- There is no tax or National Insurance for the directors or employees attending
- No P11D is required
The £150 includes all related costs, such as food, drink, venue hire, entertainment and transport.
As with sole traders, if the £150 limit is exceeded, the full amount becomes taxable.
Multiple events in the same tax year
You are allowed to hold more than one staff event in the same tax year.
For example:
- Summer event: £60 per person
- Christmas party: £80 per person
Total for the year: £140 per person – this is within the limit and remains tax free.
If instead the total was £160 per person, the entire £160 would be taxable.
Common mistakes I see
Some of the most common issues I see every year include:
- Assuming £150 applies per event rather than per year
- Forgetting that the £150 includes VAT
- Including non staff guests in the calculation
- Sole traders without staff claiming personal meals as staff entertaining
- Going slightly over £150 and assuming only the excess is taxable
Unfortunately, HMRC do not allow any flexibility once the limit is breached.
Quick summary
- The allowance is £150 per person, per tax year
- It is not per event
- VAT is included in the £150
- It applies to:
- Sole traders with employees
- Limited companies (including directors)
- Sole traders without employees do not qualify
- Exceeding £150 makes the full amount taxable
If you are unsure whether your planned event falls within the rules, or how it should be treated in your accounts, it’s always worth checking before you book.
This blog is for general guidance only and does not replace personalised tax advice.