With Christmas just around the corner, the festive season will soon be in full swing. It’s a time for joy, togetherness, and celebration, and if you’re a contractor or business owner, it’s also a time to consider the financial benefits that come with hosting your annual Christmas party. That’s right, HMRC offers some tax relief for your festive bash, and we’re here to delve into the details.
What is the Annual Party Allowance?
The Annual Party Allowance is a tax exemption provided by HMRC for companies that host an annual event for their employees. This can be a Christmas party, a summer BBQ, or any other annual gathering. The key is that it must be an event that is open to all employees.
The £150 Rule
The most crucial figure to remember is £150. This is the maximum amount, including VAT, that you can spend per person attending the event without incurring any tax or National Insurance liabilities. This amount covers not just the event itself but also any associated costs like transport and accommodation.
Note: Exceeding this limit by even a penny will make the entire amount taxable as a ‘benefit in kind’.
Who Can Attend?
The event must be open to all employees. If you’re a contractor with a limited company, this means you and any staff you employ. Partners of employees can also be invited, and an additional £150 per head can be claimed for them.
Virtual Parties
Given that, post pandemic, a lot of people now work from home, virtual events also qualify for this exemption. So, if your team is remote, you can still host a virtual Christmas party and claim the allowance.
What If Christmas Isn’t Your Thing?
If you’d rather not have a Christmas party, you can still benefit from this allowance by hosting another type of annual event. The key is that it must meet the same criteria as mentioned above.
Final Thoughts
The Annual Party Allowance is a small but welcome gift from HMRC, allowing you to celebrate with your team without worrying too much about the financial implications. Just remember to keep track of your spending and ensure you meet the criteria to make the most of this tax benefit.
So, go ahead, plan that Christmas party or summer BBQ!
PaperRocket are a multi award winning Chartered accounting practice, and Accredited FreeAgent Practitioners.
We specialise in providing friendly, non-accounting jargon, services for contractors, freelancers, sole traders, and landlords across the UK.
Our fixed fee monthly accounting packages all include a FreeAgent subscription as standard and unlimited support from your allocated accountant.
To find out how we can help you please get in touch now.
