Tax-Efficient Christmas Gifts and Parties

A Festive Guide for Employers

As the festive season approaches, employers often consider ways to reward their staff. It’s important to be aware of tax implications to ensure that your holiday cheer doesn’t lead to unexpected tax bills.

A thoughtful Christmas gift can boost employee morale. Good news: certain gifts are exempt from tax. Employers can provide ‘trivial benefits’ to staff, including:

• Small gifts: Items like food, wine, or store vouchers, with a cost per employee of up to £50.
• Birthday gifts: Again, these should be of a modest value.

Planning a festive party? Here’s what you need to know:

• Cost per head: To avoid tax implications, the cost of the party, including VAT, should not exceed £150 per head.
• Multiple events: If you’ve already hosted a summer event, the combined cost of both events should not exceed £150 per head.
• PAYE Settlement Agreement (PSA): For more complex situations, consider using a PSA to handle tax and National Insurance contributions on behalf of your employees.

To qualify for a PSA, benefits must be:

• Minor: In terms of value or type.
• Irregular: Not frequent or predictable.
• Impractical for tax deduction: Due to the nature of the benefit or the number of employees involved.

By understanding these tax rules, you can ensure that your Christmas celebrations are both enjoyable and tax-efficient. If you have any specific questions or require tailored advice, please do not hesitate to contact us on 01384 376 964.

There’s no doubt that the character in our graphics would be very happy with the level of the thresholds detailed here, but perhaps to help keep staff motivated and engaged, they might be due for a review.

Folkes Worton LLP Chartered Accountants
Accounting for the Future