Self-employed Christmas expenses: what you can and can’t claim
At a glance
Article summary
Can you claim for client gifts, staff parties or Christmas decorations as a self-employed business expense? This guide separates fact from fiction, explaining the limited circumstances in which festive costs are allowable, including the £50 limit on client gifts, meals with clients and the treatment of charity donations.
Article by GoSimpleTax
Whether you’re buying gifts for clients, organising a festive get-together or decorating your workspace, many self-employed people wonder, “Can I claim this as a business expense?”
Here, we clear up fact from fiction, giving you a breakdown of what’s allowable and what isn’t so you can keep your costs down without running into trouble with HMRC.
Gifts for customers and suppliers
Technically, yes, you claim for these but only in limited circumstances. For example, they must cost £50 or less per recipient, carry a clear business advertisement and not be food, drink, tobacco or vouchers.
So, in short, you can claim for the likes of branded mugs, calendars and stationery but chocolates, wine, hampers and gift vouchers cannot be claimed for.
Staff parties
If you’re a sole trader with employees, the rules are similar to those for limited companies. This means you can claim if the event is annual, costs £150 or less per head and is open to all employees. This cost must cover everything including food, drink, entertainment and venue hire.
You cannot claim a party if you work alone with no staff. This is because HMRC doesn’t treat sole traders as their own employees.
Christmas decorations
Yes, Christmas decorations can be claimed for if they’re for business premises. But, if you work from home, HMRC views these decorations as dual-based so they aren’t allowable.
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Meals out with clients
Unfortunately, client entertainment is never tax-deductible for the self-employed. This includes festive lunches, drinks and events - even if it’s a genuine business meeting.
Christmas charity donations
If donations are made to UK-registered charities for business purposes, they are allowable. Personal donations are not a business expense but it may qualify for Gift Aid.
Staff gifts
Unlike client and supplier gifts, you can claim for staff gifts. However, it must cost £50 or less, not be cash or a cash voucher, not be given to reward performance and it must not be contractually required. This means you can gift staff members the likes of chocolate, a bottle of wine or a Christmas hamper under £50.
What about Christmas bonuses?
Unfortunately, if you receive or give yourself a Christmas cash bonus, it is not deemed as a trivial benefit. This means it must be:
- Processed through PAYE, and
- Subject to tax and National Insurance in the same way as normal earnings
Top tax tips this Christmas
As with any expense, you should record what was purchased, why it was purchased, who it was for and keep any receipts. This can make your end of year review and Self Assessment process much easier.
Plus, don’t forget to always ask: is this solely for business purposes? If you answer no, or even maybe, HMRC is probably going to disallow it.
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