As the summer heats up, it’s not just the weather that’s looking good — your limited company has the chance to treat you (and possibly your team) to a bit of fun, with HMRC’s blessing.
Yes, really.
If you’re a director of a limited company, there’s a little-known but very handy exemption that lets you enjoy some summer social time without worrying about extra tax. Here’s what you need to know.
What’s the “Party Allowance” All About?
Let’s clear up a common confusion first — it’s not technically an “allowance.” It’s a tax exemption.
That means HMRC will let you put on an annual event — or even a few across the year — and as long as you meet their criteria, it won’t trigger extra tax or National Insurance for you or your guests.
The Key Rules to Qualify
To keep things tax-free, here’s what you need to stick to:
- It must be an annual event — Think summer BBQs, Christmas dinners, or even a family fun day. If it happens yearly, it counts.
- £150 per head (max) — This is the crucial bit. You can spend up to £150 (including VAT) per person, and it can cover more than just food — venue hire, drinks, entertainment, transport… it all counts.
- Open to all employees — If you have staff, the event must be available to all of them, not just a select few.
- Don’t go over the limit — Even by £1. If your event costs £151 per head, the whole thing becomes taxable. Not just the bit over.
Can You Claim for Family Members?
Yes — if they attend the event, and they’re your guest, you can claim £150 for them too. So if you and your partner attend, that’s £300 total. If your kids join in as well, they’re included if they’re actually part of the event.
Just keep in mind: this doesn’t turn into a “family holiday allowance.” HMRC will expect the event to be reasonable and justifiable as a staff or company event — not a disguised getaway.
Multiple Events? That’s Fine Too
You can have more than one event during the year — for example, a summer bash and a Christmas party. The £150 applies across all events in the tax year, so you can split it up however you like (e.g. £75 per person in summer and £75 in winter).
If you go over the total £150 for the year, you’ll have to pick one event to treat as tax-free and report the others as a benefit.
What’s Allowed — and What’s Not
Covered by the exemption (examples):
- Restaurant or pub meals
- Garden parties and BBQs
- Boat or theatre trips
- Overnight hotel stay if directly part of the event
Not covered (examples):
- Family holidays abroad
- Client entertainment
- Personal treats disguised as events
Quick Example
You (a sole director) host a summer dinner and bring your partner. The cost is £280 in total (£140 each). That’s under the £150/head limit, and since your partner is a guest at a company event, the whole thing is tax-free.
Don’t Forget the Paperwork
Make sure you:
- Keep receipts and breakdowns of who attended
- Note the purpose of the event
- Record total spend and per-head cost
That way, if HMRC ever asks, you’re covered.
A Final Tip Before You Fire Up the BBQ
This exemption is one of those rare, feel-good tax breaks. It’s a chance to say thanks to your team (even if that’s just you and your other half) and make some memories — all while keeping HMRC happy.
If you’re not sure how to record it properly or want to double-check you’re using the rules correctly, we’re here to help.
Enjoy the sun, the food, and the tax-free fun
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