Staff Christmas Party Exemption vs Trivial Benefits UK 2026
Two separate tax exemptions let employers reward staff without triggering Income Tax or National Insurance: the GBP 150 per head annual function exemption and the GBP 50 trivial benefits exemption. Used together, they can deliver a genuinely tax-free festive package for 2026/27.
Updated: July 2026Tax year: 2026/27~7 min read
Two distinct exemptions, two different purposes
The annual function exemption covers events -- a Christmas party, summer barbecue or similar gathering -- open to staff generally, up to GBP 150 per head including VAT and transport, per tax year (which can be split across multiple events).
The trivial benefits exemption covers individual small gifts -- not cash, not linked to performance, not part of a salary sacrifice arrangement -- up to GBP 50 per gift, with no limit on how many an ordinary employee can receive across the year (though directors of close companies face a GBP 300 annual cap).
Key conditions for each exemption
| Condition | Annual function exemption | Trivial benefits exemption |
|---|---|---|
| Limit | GBP 150/head/year (all events combined) | GBP 50 per individual gift |
| Type of exemption | Hard cap -- exceed it, whole amount taxable | Hard cap per gift |
| Must be open to all staff? | Yes, generally or by location | No -- can be individual |
| Can be cash or voucher? | n/a (an event, not cash) | No -- cash and cash vouchers excluded |
| Annual cap for directors | No separate director cap | GBP 300/year for close company directors |
Worked example: combining both for maximum tax-free reward
- Christmas party: GBP 100/head -- within GBP 150 annual function exemption, fully tax-free
- Summer barbecue: GBP 45/head -- combined with Christmas party GBP 145/head, still under GBP 150, fully tax-free
- Individual Christmas gift (bottle of wine): GBP 25 -- within GBP 50 trivial benefit limit, tax-free, unlimited count for ordinary staff
- Birthday gift earlier in the year: GBP 40 -- also within trivial benefit limit, tax-free
- Total tax-free reward per ordinary employee across the year: GBP 210, with zero Income Tax or NI for the employee and no P11D entry required
For a director of a close company, the same package would use GBP 65 of their GBP 300 annual trivial benefits cap (the two gifts), leaving GBP 235 of trivial benefit headroom still available for later in the year -- the annual function exemption is unaffected by the director cap since it is a wholly separate rule.
Frequently Asked Questions
How does the GBP 150 per head annual function exemption work?
Employers can spend up to GBP 150 (including VAT) per head, per tax year, on annual staff functions -- such as a Christmas party or summer party -- completely free of tax and NI, provided the event is open to all employees generally (or all at a location) and is annual in nature. This is an exemption, not an allowance: if the cost per head exceeds GBP 150 even by a small amount, the entire cost per head becomes taxable, not just the excess.
Can the GBP 150 exemption be split across multiple events?
Yes -- the GBP 150 per head limit can be used across more than one annual event in the same tax year (for example, a summer barbecue at GBP 60 per head and a Christmas party at GBP 80 per head, totalling GBP 140), as long as the combined cost per head across all annual functions in the year does not exceed GBP 150. If total costs come to GBP 160, you cannot simply exempt GBP 150 and tax the extra GBP 10 -- the whole event exceeding the limit typically becomes taxable, so employers usually choose which combination of events to treat as exempt to stay under the cap.
What is the trivial benefits exemption?
The trivial benefits exemption covers small, non-cash gifts to employees that cost GBP 50 or less per employee, are not cash or a cash voucher, are not a reward for work performance or in the terms of the employment contract, and are not linked to salary sacrifice. Common examples include a small gift for a birthday, a bottle of wine at Christmas, or flowers for a new baby. Each qualifying gift is entirely tax and NI free with no limit on the number of trivial benefits an ordinary employee can receive in a year.
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Is there a cap on trivial benefits for company directors?
Yes -- for directors of close companies (and other office-holders of a close company), the trivial benefits exemption is capped at a total of GBP 300 per tax year. Once a director has received GBP 300 of trivial benefits in the tax year, further small gifts become taxable in full, even if each individual gift is below GBP 50. Ordinary employees who are not directors of a close company have no such annual cap.
Can I use both the annual function exemption and trivial benefits in the same year?
Yes -- the two exemptions are entirely independent and can both be used in full for the same employee in the same tax year. A staff Christmas party at GBP 100 per head (within the GBP 150 annual function exemption) and a separate GBP 40 Christmas gift (within the GBP 50 trivial benefit limit) are both tax-free, with neither counting against the other's limit.
Does the annual function exemption cover partners or spouses attending?
Yes -- the GBP 150 per head limit applies to each attendee, including employees' partners or spouses if they are invited, not just to employees. If a Christmas party costs GBP 120 per head and includes plus-ones, the exemption still applies at GBP 120 per head for everyone who attended, as long as the event was open to employees generally.
What happens if the Christmas party costs GBP 155 per head?
Because this is an exemption with a strict cap rather than a tax-free allowance, exceeding GBP 150 per head by even GBP 1 typically makes the whole GBP 155 per head taxable as a benefit in kind (not just the GBP 5 excess), unless the employer can restructure by treating one of several events as non-exempt and settling its tax via a PAYE Settlement Agreement instead. Employers close to the limit should build in a buffer for VAT and incidental costs like transport.
Does a virtual or online staff party qualify for the exemption?
HMRC has confirmed that virtual Christmas parties (for example, a paid-for meal delivered to remote staff for a video-call party) can qualify for the annual function exemption on the same GBP 150 per head basis, provided the event is open to staff generally and otherwise meets the normal conditions -- a position clarified during and after the pandemic and still current for 2026/27.
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Disclaimer: Exemption limits (GBP 150 annual function, GBP 50 trivial benefit, GBP 300 director cap) reflect long-standing HMRC thresholds current for 2026/27. Confirm current limits at gov.uk before relying on this for a payroll or benefits decision, and take accountancy advice for close company director planning.