Group of people with Santa hats on stood behind table of buffet food and clinking glasses. Christmas decorations in the background

100 days to Christmas: Frozen party tax limit risks leaving employers out in the cold

16 September, 2026

With Christmas just 100 days away, employers should be able to spend at least £280 per head on festive parties or other annual staff events without triggering a tax charge, says the Association of Taxation Technicians (ATT).

The tax exemption for annual parties and other social functions has been frozen at £150 per head, including VAT, since 6 April 2003. The ATT says that if the limit had kept pace with inflation, it would now be worth at least £283. 

As the festive season approaches, the ATT is urging the Government to increase the exemption. Ahead of next month’s Budget, the Association also called for ministers to commit to reviewing it on a regular basis, with the intention of raising it where necessary at least every five years.

Earlier this year, the ATT published a report highlighting the tax allowances frozen for the longest in the UK.1

Jon Stride, chair of the ATT’s Technical Steering Group, said:

“Christmas parties are a valuable way for employers to thank staff and bring colleagues together, but a tax-free limit fixed in 2003 no longer reflects the cost of these events.

“An employer that goes even slightly above the £150 limit can find that the whole cost becomes taxable. That is an unnecessarily harsh result, and arises from a threshold that has been frozen for more than two decades.

“This is one of several outdated tax thresholds highlighted by the ATT’s campaign on frozen reliefs and allowances. We are calling for the Christmas party exemption to rise to at least £280 per head and to be reviewed regularly, so it does not become badly eroded again.

“Updating the limit would help employers recognise and reward their staff without an unexpected tax and administration burden. It could also reduce the pressure to scale back events and support the hospitality businesses that provide them.” 

The current rules can create a sharp tax cliff edge. If the cost of a Christmas party, or the combined cost of two or more qualifying annual events, exceeds £150 per head, the full cost can become taxable rather than only the amount above the limit.

Notes for editors:

  1. Outdated tax reliefs and allowances - the ATT's worst offenders.
  2. ATT Budget Representation - Extending tax relief for annual parties and social functions.