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  • Expenses and benefits A to Z

Social functions for employees, including annual parties

This guide explains your tax and National Insurance contributions (NICs) obligations if you provide a party or other social function for your employees.

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Exemption for certain ‘qualifying’ annual events

There is an exemption from tax, NICs and reporting if you provide a party or similar function for employees that meets the following three conditions:

  • it’s an annual event, such as a Christmas party or summer barbeque
  • the event is open to all of your employees
  • the cost per head of the event isn’t more than £150

The meaning of ‘open to all of your employees’

If your business has more than one location, an annual event that’s open to all of your staff based at one location will also qualify for the exemption.

If your workforce is organised into separate departments, then separate parties held for each department can also qualify for the exemption – as long as each of your employees will be entitled to attend one of the events.

The £150 threshold

The £150 figure isn’t an allowance that can be offset against the cost of more expensive events.

  • If any annual event you provide costs more than £150 per head, then there is no exemption and the rules in the section ‘Other social functions’ apply to the full cost of the event.
  • If you provide more than one annual event, with individual costs below £150 per head but with a combined cost above £150, see the section ‘If you provide two or more qualifying annual events’.

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You provide one qualifying event

Definitions or restrictions

You provide one annual event during the tax year, which is open to all your employees and costs no more than £150 per head.

What to report, what to pay

You have:

  • no reporting requirements
  • no tax or NICs to pay

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You provide two or more qualifying events

Definitions or restrictions

You provide one or more annual events during the tax year, each of which costs no more than £150 per head and is open to all your employees.

What to report, what to pay

If the combined cost of the events is no more than £150 per head, then you have:

  • no reporting requirements
  • no tax or NICs to pay

If the combined cost per head of the events is more than £150, then:

  • you can apply the exemption to whichever combination of events best ‘use up’ the £150 threshold – follow the link below to see an example
  • for any remaining events, the rules in the section ‘Other social functions’ apply

Examples of how HMRC treats multiple annual events provided for employees

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Other social functions

Definitions or restrictions

You provide an event for your employees that doesn’t meet the criteria for exemption explained in the previous sections.

Examples of events that don’t qualify for the exemption include:

  • any event costing more than £150 per head
  • an event costing less than £150 per head if you have already ‘used up’ the £150 threshold on other events (see the earlier section ‘You provide two or more qualifying events’)
  • any event that isn’t open to all of your employees, such as a Christmas party for directors only
  • any event that isn’t annual – for example, a party to mark the award of a major new contract

What to report, what to pay

For employees earning at a rate of less than £8,500 per year, you have:

  • no reporting requirements
  • no tax or NICs to pay

For company directors or employees earning at a rate of £8,500 or more per year:

  • report on form P11D - section M
  • pay Class 1A NICs on the value of the benefit

Work out the value to use

The value to use is the full cost per head of the event – not just the excess amount over the £150 threshold.

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Where to report – understanding the £8,500 threshold

It’s important to choose correctly between forms P11D and P9D for each employee. The form to use depends on the whether the employee is a director of your company and on whether their earnings are above or below an annual rate of £8,500. For more information – including details of what’s included in the £8,500 threshold - follow the link below.

End-of-year forms at a glance

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Technical guidance

EIM21690: annual parties and other social functions

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