UK business owners are being reminded of a valuable tax free perk available throughout the year, a lesser known HMRC rule that allows companies to spend up to £150 per person on staff events without triggering any tax liabilities.

The rule, often referred to as HMRC’s hidden festive allowance, is designed to encourage employers to reward their teams and boost staff morale. Under the exemption, companies can claim back the full cost of events such as Christmas dinners, team outings, parties, or even a summer get together, as long as the total annual cost per employee does not exceed £150.

The allowance is surprisingly broad. It covers food, drinks, entertainment, venue hire, decorations, and even transport to and from the event. This means that everything from a three course Christmas meal to a staff night out or an activity day could qualify, provided it is a genuine social event.

There are, however, strict rules that businesses must follow. The event must be open to all employees, not just managers or directors. It must also be an annual or occasional social function, rather than a reward for specific individuals. Most importantly, the £150 limit applies to the total cost per head for the entire year. If a business spends £151, the exemption is lost and the whole amount becomes taxable.

Many companies do not realise that the exemption can be split across multiple events. For example, a business could host a summer barbecue costing £60 per person and a Christmas meal costing £90 per person, both fully tax free as long as the combined total stays under the annual limit.

Tax experts say the rule is underused, particularly among small businesses and new directors who assume company funded parties will automatically attract payroll taxes. In reality, HMRC specifically created the exemption to support employee wellbeing and to encourage companies to invest in workplace culture.

With rising costs affecting businesses across the country, the £150 allowance offers an opportunity to celebrate the festive season, strengthen team morale, and do so in a completely tax efficient way. Many accountants are now urging employers to use the allowance before the end of the tax year to make the most of a benefit that often goes unnoticed.