The £150-Per-Head Rule: How UK Office Christmas Parties Actually Get Taxed
Go one pound over £150 per head across the year's staff events and the whole amount can become taxable, not just the excess. How the exemption works and how employers commonly plan around it.
How the exemption actually works
The rule is often described loosely as "£150 per head is tax-free for the Christmas party," but the mechanics are more specific: it is an annual exemption for staff functions in general, calculated per head, covering every qualifying event across the tax year combined — not a fresh £150 allowance for each individual party. A company that runs a summer barbecue costing £60 per head and a Christmas party costing £100 per head has used £160 per head for the year, which is over the limit.
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This is the detail that causes the most confusion: the £150 figure is an exemption, meaning if total qualifying costs stay at or under it, nothing is taxable — but if the total goes even slightly over £150 per head, the exemption is lost entirely for that event, and the whole cost per head (not just the excess) is typically treated as a taxable benefit, reportable and subject to tax and National Insurance (commonly settled by the employer through a PAYE Settlement Agreement rather than putting it on individual payslips).
| Total cost per head for the year | Outcome |
|---|---|
| £150 or less | No tax or NI due — exemption applies in full |
| £150.01 or more | Exemption lost — the full amount per head can become taxable, not just the excess |
What counts towards the £150
- Food and drink for the event.
- VAT on the above.
- Transport laid on to and from the venue.
- Overnight accommodation provided as part of the event.
Gifts given separately (see the trivial benefits exemption) are assessed under different rules and are not usually added into the same £150 calculation, though the two exemptions are often used together around the same event.
Budget Planner
Plan your monthly budget by entering income and expenses across all categories to see your surplus or shortfall.
Plan the event budget with headroom under the limitSources
Frequently asked questions
What is the £150 per head rule for Christmas parties?
HMRC allows employers to spend up to £150 per head (including VAT, transport and accommodation where relevant) across all annual staff functions combined without it becoming a taxable benefit for employees, provided the event is open to staff generally and certain other conditions are met.
What happens if the cost goes over £150 per head?
The £150 figure is an exemption, not a tax-free allowance with the excess simply taxed — if total annual staff function costs per head go over £150, the whole amount typically becomes a taxable benefit for each attendee, not just the amount over £150.
Does the £150 limit apply per event or per year?
It applies to the combined total of all annual staff functions across the tax year, calculated per head. A company running both a summer party and a Christmas party needs to add the two together when checking against the £150 limit.
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