Employers have no need to be a scrooge this year as staff Christmas parties are potentially tax-free, accountants says. Companies are allowed annual taxfree expenditure on staff entertainment of up to £150 per employee.
The £150 not only covers food and drink but also accommodation and transport home. And workers can even bring partners as long as the total cost per couple does not exceed the £150 limit.
The tax-free limit applies for a tax year, so bosses can put on a summer party and Christmas dinner if they want, providing the total cost is no more than the £150 per worker limit. However, if employers go just one penny over the limit, the full amount spent will become liable to income tax and National Insurance (NI) for both employee and employer.
Meanwhile, gifts for employees are taxable. Cash presents, such as Christmas bonuses or vouchers redeemable for cash, will have to have tax and NI contributions paid through the PAYE system.
But bosses who give staff high street gift vouchers can pick up the tax bill on behalf of their employees by setting up a PAYE Settlement Agreement with their tax office.