Are Christmas gifts taxable?

Christmas Bonuses

If you give Cash bonus to your employees, it counts as earnings for an employee therefore you will have to add that to Employee’s payroll and deduct relevant tax and National Insurance.

If you provide your employees with gifts such as chocolates, bottle of wine, etc. there are no tax implications if the gift is considered as “trivial” by HMRC. There is no set monetary limit below which the gifts are deemed to be trivial in amount. But generally anything up to £50 is considered as trivial.

Christmas Party

You can spend up to £150 per year per head without any tax implications. £150 is the annual limit so if you have more than 1 party in a year, the total spent per person in a year should be less than £150, if it goes over £150 then the whole amount becomes taxable. You can also claim an additional £150 per person for each employee if they bring along their partner or a family member. To claim the £150 exemption, the party must be open to all the employees.

Christmas Gifts to Clients

These are treated as business entertainment and are dis-allowed for tax purposes unless the following 3 conditions are met:

The gift must carry a business logo and is branded as advertisement. The logo should be on the gift itself and not just on the wrapping paper.

The value of the gift is less than £50

The gift is not food, drink, tobacco, or vouchers.

VAT on Christmas gifts to your clients

You can claim the VAT on business gifts made to its customers if the value of the gift does not exceed £50. However, the limit is applied on a 12 month roll over period. You will have to account for output VAT on the value of the gift if it is more than £50 in a year.

For more information, please contact us on 01702 345 207 or email us at info@arb.accountants