Which expenses can the self-employed claim at Christmas?

If you plan on celebrating as a business, then you may be able to claim a tax allowance. But this is only available to those trading as a limited company, rather than as a sole trader or partnership.

For self-employed businesses with employees, there is an exemption from tax, National Insurance, and reporting requirements for annual staff events, provided the cost does not exceed £150 per person. This allowance can cover a Christmas party or be split across multiple events. However, if the total cost goes over the limit, the entire amount becomes taxable. Additional complexities can arise if, for example, a staff member acts as the host for the evening.

You can also claim an additional £150 for guests of employees, whether it’s family or friends. And it also applies to online or virtual parties. More advice is available via Gov.uk.

The rules are different if your business only has directors, and no employees. In this case, there’s no tax relief available, unless the entertainment takes place when you’re away from your usual place of work, such as on a business trip that you would have taken anyway.

And if you’re hosting a Christmas party for clients or customers, this is considered business entertainment, and therefore it’s not an allowable expense.

If you’re planning to thank staff with a present that doesn’t have a direct cash value, then HMRC might accept it as a trivial benefit which is defined as a small gift given for personal reasons, rather than those relating to employment. 

But if you’re paying a monetary bonus, this will be treated the same way as regular earnings. And if you offer a gift with a cash value, this will also need to be reported either as part of your employee’s earnings or on their P11D form.

Client gifts can be treated as a business expense provided that:

• You spend no more than £50 per client per year,
• The gift includes a prominent advertisement for your business, and
• It is not food, drink, tobacco, or a voucher that can be exchanged for goods or cash

You may also claim tax relief on Christmas decorations as part of your office’s day-to-day running costs—but only if you work from an office. This option does not apply to home-based workspaces, even if you have a dedicated office area.

While claiming festive expenses can help reduce costs, it shouldn’t dictate whether you celebrate the season. Consider whether hosting a client party could generate more revenue than its cost, or if adding a Christmas tree to your home office might make working during the holidays more enjoyable.

But it’s important for anyone self-employed to know what costs and expenses need to be reported, and whether it’s possible to claim tax relief or other support to offset the expenditure. And for information covering the whole year, we have sections dedicated to Financial Wellbeing, and Self-Employed Tax, in our Advice section.

The above information is for information purposes, and should not be relied upon as professional tax advice. For dedicated advice tailored to your individual situation, you should speak to HMRC, or a professional tax advisor or accountant.