Tax-Deductible Christmas Gifts & Expenses
Accounting for Christmas Cards
Cards are a festive tradition, although lots of organisations may choose to send digital greetings to minimise paper wastage – it is worth noting – if you decide to send cards, these can be recorded as a Tax-Deductible Christmas Gift and expense.
Worth noting, that any charitable donations or contributions to a grassroots sports club are also deductible for tax purposes. You can take off any such payments before calculating your corporation tax liability.
Employee Festive Gifts
If you’re a limited company, you can treat yourself and your staff to a Tax-Deductible Christmas Gift, but this must be up to £50 and cannot be given as a cash bonus.
Gifts up to the cap count as a trivial benefit, so are exempt from PAYE and Employer’s National Insurance.
Any gifts given to any employee are not tax-deductible, and delivery charges count towards the limit.
One option is to give promotional gifts, including anything that is considered business advertising, (with the logo or branding on the item) not just shown on the outer packaging.
You can’t however give food, alcohol, tobacco, vouchers or drinks as a promotional item.
Declaring Staff Gifts Over £50
You must declare gifts over £50, so if you present your staff with gift vouchers for over this, you’ll need to submit a P11D to HMRC.
Similarly, any higher-value gifts are considered tax perks, so you’ll need to pay National Insurance – a present costing £60 would cost closer to £85 when you calculate the tax and NI.
Paying Employees a Festive Bonus
A workplace tradition was to give a small cash bonus in a Christmas card, but if you offer anything in cash, it counts as earnings.
You’ll need to add the bonus to your payroll and apply the usual PAYE taxes and National Insurance deductions.
Recording Business Christmas Party Expenses
Each business has a party allowance of £150 per employee – which can be used for virtual celebrations and in-person events.
Businesses can spend that budget on entertainment, postage, food and drink, and all staff must be invited to attend for the allowance to be eligible.
VAT on these expenses is reclaimable, but only against costs for staff entertainment, rather than funds spent for the benefit of the business or directors.
Alternative Staff Christmas Bonuses
If you’re not organising gifts, bonuses or parties this year, there are several other options to thank your workforce for their hard work – without tax liabilities or additional declarations.
Possible options include:
- Offering additional holiday allowances.
- Providing each employee with a day or half-day for Christmas shopping.
- Flexible hours to help families attend festive events, such as school nativities.
- Team-building experiences to build morale and inject some fun into the workplace
I love this! So useful and so accountanty in the most festive manner. Thank you Joseph.