Tax-Free Staff Functions & Annual Events (£150 Exemption)

December 3rd, 2025

Overview 

Employers can provide certain annual social events for employees without creating a taxable benefit, providing certain conditions are met.  This exemption applies whether the event is held in-person or virtually (including costs such as online hosting or equipment).  When the conditions are met, no income tax or national insurance arises for employees on the cost of attending the event. The figure of £150 is not an allowance, it is an exemption.

What Counts as an Annual Function? 

  • The event must be an annual party or similar annual function.

  • It does not need to be the same event every year.

  • Virtual events qualify if all rules are met.

 The £150 per Head Exemption 

  • Total cost (including VAT, travel, accommodation, etc.) divided by attendees must not exceed £150 per head.

  • If the cost exceeds £150 – even by £0.01 – the full amount becomes taxable.

  • Cost is based on actual attendees, not RSVPs.

 Multiple Events in a Tax Year 

  • Employers may choose which event(s) to apply the exemption to.

  • Combined exempted event costs must not exceed £150 per head.

  • No formal HMRC election is required.

 Guests 

  • Employees may bring guests; no statutory limit applies.

  • Guests count toward the per-head cost calculation.

  • Excessive guest numbers may deem the event to be considered non-staff entertainment. 

 If the Conditions Are Not Met 

  • The full VAT-inclusive cost becomes a taxable benefit for each employee attending.

  • Guest-related costs are taxable on the relevant employee.

  • Employers cannot simply disallow the cost in their tax computation as an alternative. 

 Quick Checklist 

  • Is the event annual?

  • Is it open to all employees or all employees at one location?

  • Is the total cost £150 or less per attendee?

  • Have guest numbers been included?

  • Are multiple events structured to maximise the exemption? 

 If you have any questions or would like to understand how this tax exemption may apply in specific circumstances, please do not hesitate to get in touch.  We would be delighted to discuss this with you.  

Our contact details can be found here.