Answers · UK 2025/26
Is there a tax-free allowance for staff Christmas parties and events in the UK?
Yes -- the annual events exemption lets an employer spend up to £150 per head, per year, on staff social events (such as a Christmas party) completely free of tax and National Insurance for employees, provided the event is open to all staff and the total cost per head, including VAT, does not exceed £150.
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HMRC's annual events exemption allows employers to provide staff social functions, such as a Christmas party or summer event, without any tax or National Insurance charge for employees, as long as the total cost per head across all qualifying events in the tax year does not exceed £150, including VAT and any transport or accommodation provided as part of the event. This is an exemption, not a deductible allowance -- if the cost per head goes even £1 over £150, the whole amount becomes taxable as a benefit in kind, not just the excess above £150. Several conditions must be met. The event must be open to all employees generally, or open to all employees at a particular location if the employer has multiple sites -- a party for directors only, or one department only, does not qualify. The exemption can be split across more than one event in the same tax year (for example a summer barbecue and a Christmas party), as long as the combined cost per head for all qualifying events stays within £150; if the combined total goes over £150, the employer must choose which event or events to treat as exempt, and any remaining event becomes fully taxable. Cost per head is calculated by dividing the total cost of the event (including VAT, food, drink, entertainment, transport and overnight accommodation) by the total number of people attending, including any non-employee guests such as partners, since their attendance also counts toward the headcount used in the calculation. If the exemption is not met -- for example because the party cost £180 per head -- the full £180 becomes a taxable benefit reportable on a P11D, or the employer can settle the tax and Class 1B National Insurance on the employees' behalf through a PAYE Settlement Agreement, keeping the event effectively tax-free for staff even though the exemption itself was not met.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.