As the festive season approaches, many business owners are gearing up to celebrate their teams and reflect on the year’s achievements. What better way to do this than by making the most of tax-free benefits that allow you to throw parties, reward employees, and boost morale—all without taking a hit on your taxes?
In this blog, we’ll dive into some valuable tax savings, including the Christmas Party Allowance, Trivial Benefits, and other simple, tax-savvy perks that your business can offer to build a thriving, engaged team.
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Celebrate with the Christmas party allowance 🎉
Holiday parties are a highlight of the year for many teams, and the Christmas Party Allowance lets you host an event everyone can enjoy—minus the tax burden!
What’s the Christmas party allowance?
- £150 per person tax-free: You can spend up to £150 per employee (including VAT) on your Christmas party or any other annual event without incurring additional tax.
- Flexible Event Options: This applies to both in-person and virtual events, making it ideal for hybrid or remote teams.
Example: If you’re hosting a Christmas party for 50 employees, you have up to £7,500 (50 x £150) tax-free to make the event unforgettable! Just make sure the total per-person cost stays within £150—otherwise, the whole event becomes taxable.
Pro Tip: Got a small budget for multiple events? Split the allowance! You can use it for both a summer BBQ and a Christmas party, as long as total spending per head doesn’t exceed £150 across all events.
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Delight employees with trivial benefits 🎁
Sometimes it’s the little things that make a big difference. Trivial Benefits are tax-free small perks that let you show appreciation for your team all year long.
Trivial benefits criteria:
- Max £50 per benefit: The item or gift must not exceed £50 (including VAT) per employee.
- Non-Cash Only: The benefit can’t be cash or cash vouchers but can include things like gift cards for coffee or small treats.
- No Strings Attached: The benefit shouldn’t be linked to performance or be part of their contract.
Ideas for Trivial Benefits:
- A small gift card for a local café
- Birthday flowers or seasonal treats
- A wellness hamper or a cosy mug and tea set
Pro Tip: There’s no set limit on the number of trivial benefits you can offer, but directors of close companies have an annual cap of £300. This means you can spread cheer throughout the year in small ways that keep your team motivated.
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Fuel skills with tax-free employee training 📚
Investing in employee development is one of the best ways to build a competitive, skilled team—and the best part? Most training expenses are tax-free for your business and don’t count as a taxable benefit for employees.
What training is covered?
- Job-related skills or general business knowledge (like leadership or digital skills)
- Courses, exams, and related materials
Training is fully deductible for corporation tax, helping you save while developing valuable team skills.
Pro Tip: Ask employees what skills they’d like to develop! Not only does this save on taxes, but it also boosts engagement by supporting their growth.
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Encourage healthy commutes with the cycle to work scheme 🚴♀️
The Cycle to Work scheme is a tax-free way to promote healthy, sustainable commuting. By providing employees with a bike and related gear, both employees and employers enjoy tax and National Insurance savings.
How it works:
- Employees save up to 39% on the cost of a bike and accessories by reducing their income tax and National Insurance contributions.
- Employers also save on National Insurance contributions while offering a fantastic wellness perk.
Pro Tip: The scheme covers bikes, helmets, locks, and more, making it a cost-effective benefit for both employer and employee—and an environmentally friendly one!
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Stay connected with tax-free mobile phones 📱
Need your team to stay connected on the go? Providing company-owned mobile phones can be a tax-efficient solution.
Tax-Free mobile phone rules:
- You can provide one mobile phone per employee without it being considered a taxable benefit, provided the phone is mainly for business use.
- The phone must be owned and paid for by the business.
Not only does this cover your team’s communication needs, but it also reduces National Insurance costs for both employees and employers.
Pro Tip: If your team relies on personal phones for work, consider upgrading to company-provided phones to enjoy these tax savings!
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Pension contributions: Save taxes while building futures 💰
Contributing to employee pensions not only supports their future but also helps reduce your tax burden. Employer pension contributions are tax-deductible, and employees enjoy National Insurance savings.
Benefits of pension contributions:
- Fully deductible from corporation tax
- No additional National Insurance contributions
Pro Tip: Business owners can also contribute to their own pensions, combining tax advantages with long-term financial planning.
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Year-Round events: Beyond just Christmas! 🎈
While the Christmas Party Allowance is widely known, this tax-free perk actually applies to any annual event! Mix it up with other gatherings throughout the year to keep spirits high.
Other tax-free events to consider:
- Summer BBQs or team-building days
- Milestone celebrations, like company anniversaries or project launches
Pro Tip: Spread your events across the year to keep employee morale up and enjoy tax-free celebrations whenever you want—just remember the £150-per-head rule.
Final thoughts: Keep your team happy, your culture strong, and your taxes low
Taking advantage of tax-free benefits not only helps your business save but also creates a supportive, engaging environment for your team. From holiday parties and training opportunities to small gestures that show appreciation, these perks are easy to apply and can make a big difference.
If you’d like help navigating these tax-saving opportunities or want to create a strategy tailored to your business, our team of experts is here to assist. Let’s make the most of these tax relief options so your business can enjoy more celebrations, stronger team connections, and smarter tax savings.
Here’s to making the most of tax season—while enjoying every season with your team!
