How to party down the tax efficient way

Money, Resources

This has been probably the least summery summer on record. Clouds are a constant fixture, rain is battering every part of the country, and flooding is widespread. But don’t throw yourself off a cliff just yet – why not cheer yourself up with a nice summer party? Just be sure to rent a marquee.

Even though freelancers are the tiniest of tiny businesses, we’re allowed the same tax relief on office parties as big businesses, so you can throw a few more sausages on the BBQ safe in the knowledge you’re as tax efficient as possible. Specifically, you’ll get an exemption from tax, National Insurance Contributions and reporting if you play by the rules.

OK, my party planner wants to know my budget

The figure you’re after is £150 – that’s the allowed budget per-head for any “annual party”. You can also claim an exemption for any family members that attend too – so if you plan a party for yourself and your partner you’ll have £300 to play with – and that will buy you plenty of vol-au-vents.

The rules

As with anything involving our beloved taxman, there are some rules you must be aware of when attempting to claim for your annual party.

  • The £150 figure is an exemption, not an allowance, meaning if you go over budget you cannot claim back the first £150. If you want to claim relief £150 per head is a hard limit.
  • To claim the exemption your party must be open to all employees. Obviously this isn’t much of a problem for freelancers who, for the most part, don’t have any employees.
  • The party must be an “annual event”, not a one-off.
  • The £150 figure is an annual maximum. If you claim £150 per head for a summer party, you cannot claim anything for a Christmas party. You can, however, split your £150 exemption over a number of events; for example £75 for a summer BBQ and £75 for a Christmas party.

Sole traders go home

This tax relief is only available to freelancers operating their own limited company unfortunately, so if you’re a sole trader looking to get your groove on you’ll have to do it the old fashioned way – without tax breaks.

Photo by Taz

  • Nick Broom

    Is the £150 allowance for partners something that can still be paid out of the company account, that is, it’s not something they pay personally and then claim relief through a personal tax return?

    • Crunch

      Hi Nick,

      The party should be paid for by the company, not reimbursed afterwards!

      • Matt

        What expense category would this fall under in Crunch?

        • Crunch

          Hi Matt,

          It’d go under subsistence expenses.