Feeling generous this Christmas?

by Michael Blaken

Published on 6th December 2023

It’s beginning to look a lot like Christmas, and for business owners this may also mean the time for making gifts to your staff and to your contacts, or providing entertainment.

However, it is important to remember that HMRC is ever watchful, so before you get carried away with the season of good cheer, you should familiarise yourself with the tax rules.

If you are overly generous, you may need to pay tax and National Insurance. Moreover, if you fail to declare taxable gifting-related spending, then you could also face penalties. Merry Christmas from HMRC!

The office Christmas party

If you are going ahead with an office party, you should be aware the amount you pay, tax-free, is capped.

The maximum you can spend per employee is £150 and this is the allowance for the whole year, not just Christmas, so do take into account what you have spent so far.

Tax rules on Christmas gifts

There are also tax rules around giving and receiving gifts, which apply all year and not just at Christmas

  • Cash bonuses: any cash you give to employees as a Christmas bonus counts as earnings, so you’ll need to add the value to your employees’ other earnings and take off tax and National Insurance through payroll.
  • Goods: it is only free to give a gift to an employee, client, or supplier if the gift is ‘trivial’ in HMRC’s eyes. If the items can’t be counted as trivial benefits, you must report them on form P11D and pay National Insurance on the value of the benefit.

For you – the donor – the gift is non-tax deductible. There are also complex rules governing gifts to a third party, such as making gifts to a supplier’s employees. If you are not sure of the rules, do seek advice before going ahead.

The rules are slightly different if you are self-employed. Here, you don’t have to report or pay tax or National Insurance on personal gifts (such as Christmas presents).

If you would like more help or advice on gifting and entertaining, then please get in touch with the tax team here at Optimum.

We help business owners with the tax planning, and working with businesses across Swindon, Wiltshire, Cheltenham, Gloucestershire, and the wider area.

And in the meantime, have an enjoyable Christmas!

Next post...

Swindon networking breakfast - 16th January

Come along to our networking breakfast at our Swindon offices on January 16th 2024 - informal networking, with tea, coffee and bacon rolls.

Read more

Previous post...

Autumn Statement 2023

Here's our reaction to the 2023 Autumn Statement - there was talk of backing British business but there wasn’t a huge amount of substance.

Read more

Stay up to date