How to Make Staff Events Tax-Free
A staff night out, summer BBQ, or festive celebration can do wonders for team morale, but no one wants the fun spoiled by an unexpected tax bill. Luckily, HMRC has a little-known rule that allows businesses to host events for employees that are completely tax-free. Here’s how you can make the most of the annual staff events exemption.
The magic number: £150 per head, per year
HMRC allows employers to spend up to £150 (including VAT) per attendee, per tax year, on annual staff events without creating a taxable benefit.
This covers everything – food, drink, venue hire, entertainment, and even transport home. As long as you stay within the allowance, employees won’t have to pay tax or National Insurance, and the business can still claim the costs as a deductible expense.
Plan carefully, as every pound counts
There’s a catch: if the total spend per head creeps even slightly above £150, the entire cost becomes taxable, not just the excess.
So if your Christmas party comes in at £151 per person, suddenly every penny of that spend could create a benefit-in-kind for employees. A bit of forward planning (and keeping an eye on those final bar tab totals) can save a lot of hassle.
One big bash – or little and often?
You don’t need to blow the budget on a single event. HMRC lets you spread the allowance across multiple staff events in the year.
For example:
A summer BBQ at £40 per head
A quiz night at £30 per head
A Christmas party at £75 per head
That’s £145 per head in total – completely tax-free. It’s a flexible way to celebrate different milestones with your team without worrying about exceeding the limit.
Who can come along?
To qualify for the exemption, the event must be open to all employees, or to all staff at a specific location.
Even better, the allowance also covers spouses and partners if they attend with the employee. Inviting partners can help make events feel more inclusive and family-friendly.
What doesn’t qualify for this exemption? Exclusive director-only dinners or small team nights out. Those don’t meet HMRC’s “open to all” rule.
Don’t forget about trivial benefits
The £150 staff events allowance is separate from HMRC’s trivial benefits exemption. This covers low-cost perks, such as birthday cakes, bottles of wine, or flowers, worth up to £50 each.
They won’t eat into your £150 limit. However, directors need to be careful: trivial benefits for directors are usually capped at £300 per year.
Make the most of it
When planned properly, staff events can:
✅ Boost morale and reward your team
✅ Build stronger workplace culture
✅ Bring people together outside the office
✅ Be fully tax-free when within the rules
The takeaway? With a little planning, you can celebrate, thank your staff, and even include their partners, all without creating a tax headache.
Disclaimer: This article is for general information purposes only and reflects the law and guidance at the time of writing. It does not constitute professional advice. Please consult a qualified advisor before making financial or tax-related decisions.