Christmas Gifts From Your Limited Company: What Is Tax-Deductible?

Usually not. HMRC's BIM45065 treats business gifts like business entertaining under section 1298 of the Corporation Tax Act 2009, so the cost is added back.

The main exception, in BIM45070, is a gift that carries a conspicuous advertisement for your company. It stays deductible only if:

• it is not food, drink, tobacco or a voucher exchangeable for goods; and
• all such gifts to the same person cost no more than £50 in the company's accounting period.

The advert must be on the gift, not the wrapping. A £30 branded umbrella can qualify; a £40 hamper cannot.

VAT has its own £50 test. Under VAT Notice 700/7, you do not account for output VAT on business gifts of goods to the same person if their total cost is £50 or less, excluding VAT, in any 12-month period. Above that, VAT is due on the cost of all the gifts to that person if you reclaimed VAT when you bought them.

Gifts to your own staff are deductible for the company (BIM45074). For the employee, GOV.UK's trivial benefits rules mean no tax or National Insurance if the gift:

• cost £50 or less;
• is not cash or a cash voucher;
• is not a reward for work or performance; and
• is not in their contract.

A turkey, a hamper or a non-cash gift card under £50 can qualify. If you are a director of a close company, your own trivial benefits are capped at £300 a tax year. A cash Christmas bonus is pay and goes through payroll, with employer National Insurance at 15% for 2026/27. Our guide to trivial benefits and staff parties has more examples.

Under section 264 ITEPA 2003, explained in EIM21690, an annual party open to all employees is tax-free if the cost per head, across all annual functions in the tax year, is £150 or less. It is an exemption, not an allowance: at £151 per head the whole amount is taxable. Clients you invite are business entertaining, and their share of the cost is not deductible.

Some companies donate to charity instead and tell clients by card. A cash donation can be deducted as a qualifying charitable donation, as our guide to limited company charitable donations explains.

Our payroll service puts bonuses through PAYE, and our P11D service reports any gift or party that falls outside the exemptions. Monthly packages start from £45.83 + VAT, and the exact fee is confirmed in writing first. You can book a free intro call about our services; advice on your own company's gifts is a paid consultation.