Christmas can be a  costly time of year, however there are tax breaks that you really should make the most of. Here are our six tips which will help spread some festive cheer and save some tax. Don’t miss out!

1. Client Gifts

If you’re keen to stay on your clients’ ‘nice’ list, a Christmas present is an ideal way to be noticed in a favourable way. Festive gifts are an allowable expense as long as they meet three criteria:

  • Sant's sack full of presentsThey exceed no more than £50 in value.
  • They are not food, drink, tobacco or a gift voucher.
  • Contain an advert for your business on the gift itself (not just on the wrapping paper or gift label!).

2. Employee Presents

The last two years have been challenging. Many people want to thank their teams for their hard work and flexibility during the year. Christmas is the perfect time! Please note that if the gift doesn’t have a direct cash value, HMRC may see it as a trivial benefit. Otherwise, it must be reported on the employee’s form P11D. Any festive cash bonus must go through your payroll system, with Income Tax and National Insurance payable.

3. Creative Gifting

Think about gifts that show you are a caring employer. How about the gift of time? Maybe some extra time off to watch a school play or catch up with Christmas preparations? This could help ease the festive frazzle and would be appreciated much more than a Christmas hamper.

Christmas party character on balloons4. Party Time!

Up to £150 per employee can be deducted for annual events – such as a Christmas party – without notifying HMRC. This is classified as staff entertaining and assumes that all employees are invited. Entertaining clients and subcontractors is treated differently – as business entertaining – which is not tax-deductible. This applies to virtual events as well as traditional Christmas gatherings.

5. Deck The Halls

Christmas decorations for your office can be claimed as expenses. This includes a Christmas tree and, yes, you get tax relief on tinsel! However please note that this doesn’t apply to home-based offices. So, hybrid and home-based workers can’t claim their Christmas baubles against expenses.

 

Figure in Santa hat holding large present6. Treat Yourself!

If you are a limited company, you can treat yourself to a gift at Christmas, as this is from the company, not you personally. To count as a ‘trivial’ benefit  – and keep clear of the P11D – your present to yourself must not exceed £50 in value, and your total for the year must not exceed £300.

“This is the time of year to appreciate others,” says Emily Bridges of re:accounts. “Why not do this as tax-efficiently as possible?”

We hope that you and your families have a wonderful Christmas. Remember – if you would like to pay less tax, we’d love to have a chat. We’re huge coffee fans and mince pies are optional.