A few reminders for the Christmas season

Gifts, Parties & Early Payments: All You Need to Know

As the Christmas season approaches, we at TAG Accountants Group thought it would be helpful to share a few important reminders regarding early staff payments for Christmas, festive gifts for employees, and hosting staff Christmas parties.

There are some valuable tax breaks available that can help create a positive and festive atmosphere for your team, all while ensuring that HMRC does not end up playing the role of the Grinch.

Paying Staff Earlier Than Usual in December

In December, many organisations pay their employees earlier than usual, allowing staff to receive their wages ahead of the Christmas holidays. This approach not only ensures payroll is managed before the festive break but also supports employees in covering their seasonal expenses.

HMRC’s RTI Reporting Adjustments for Early Payments

Continuing with the practice of previous years, HMRC has announced a relaxation of the RTI (Real Time Information) reporting obligations to accommodate this adjustment, making it easier for businesses to provide early payments without additional administrative burdens.

Ensuring Compliance and Avoiding Benefits Issues

If you decide to pay employees earlier than usual during the Christmas period, you must report the usual or contractual payment date on your Full Payment Submission (FPS). For example, if you bring the payment forward and pay employees on 20th December instead of the usual 31st December, you should still record the payment date as 31st December in your FPS. Additionally, ensure that the FPS is submitted on or before the usual payment date of 31st December to remain compliant with HMRC requirements.

By following this approach, you safeguard your employees’ eligibility for income-based benefits, such as Universal Credit. Reporting the usual payment date ensures that an early payment does not inadvertently impact your staff’s current or future benefit entitlements, which could otherwise be affected by the timing of their income being recorded. This simple step helps to avoid any unnecessary complications or financial disadvantages for your employees during the festive season.

Christmas Gifts of up to £50 Per Employee Can Be Tax Free

Christmas is an excellent opportunity to show appreciation to your staff, and certain gifts can be provided tax-free if managed correctly. Employers are permitted to offer their directors and employees what are referred to as “trivial benefits in kind” without incurring tax liabilities. This exemption covers modest gifts given during the festive season, provided the cost to the employer does not exceed £50 per gift.

The same exemption can also be applied to gifts for other occasions, such as birthdays, making it a versatile option for spreading goodwill.

Rules Around Gifts of Up to £50

Examples of eligible gifts include items like food hampers, bottles of wine, or store vouchers. However, it is important to note that the exemption does not apply to cash gifts or rewards linked to performance. By adhering to these rules, employers can share seasonal cheer with their teams while taking advantage of available tax benefits.

Staff Christmas Parties Without Extra Tax Burden

The rules governing Christmas parties remain unchanged, ensuring that there is no taxable benefit for employees arising from the cost of such events, provided certain conditions are met. To qualify for the exemption, the party must be open to all staff, and the cost to the employer must not exceed £150 per person, inclusive of VAT. This exemption allows businesses to celebrate the festive season with their teams without creating any additional tax burdens for their employees.

Combining Event Costs for Tax Compliance

If your organisation has already hosted another event earlier in the year, such as a summer party, the combined cost of the two events must not exceed £150 per person for the exemption to apply. For instance, if the summer event costs £80 per person and the Christmas party £100 per person, the total of £180 would exceed the limit. In this case, only one of the events would qualify for the exemption, and employees would be liable for tax on the cost of the other event.

To prevent this situation and simplify matters, employers have the option to manage the associated tax and National Insurance Contributions (NIC) on behalf of their employees. This can be achieved by entering into a PAYE Settlement Agreement (PSA) with HMRC, ensuring that the festive cheer is not dampened by unexpected tax liabilities.

Season’s Greetings From All of Us at TAG Accountants Group!

We hope you find these options helpful for saving tax while spreading some festive cheer and motivation among your team. The TAG Accountants Group team have already celebrated our own Christmas party and will continue working hard to support you right up until 23rd December.

If you require any advice or guidance on these topics or any other matters, do not hesitate to reach out to us. Simply HERE to get in touch via the website or alternatively give us a call on 01902 783172 and we will get back to you.

In the meantime, from all of us at TAG Accountants Group, we wish you a very Merry Christmas and a successful, prosperous 2025!