Oak coasters laser engraved with a business logo, round and square, as a client Christmas gift

Are Christmas Gifts for Staff and Clients Tax-Free? The Three UK £50 Rules

For staff, usually; for clients, only in narrow cases. A staff gift is tax-free if it costs £50 or less including VAT, isn't cash or a cash voucher, isn't a reward for work and isn't contractual. A client gift is normally deductible only if it carries your business's advert, isn't food, drink, tobacco or a voucher, and costs £50 or less a year per client.

VAT on business gifts adds a third £50 test. This guide summarises HMRC's published guidance as it stands on 22 October 2026, with links to every source at the end. We make engraved gifts; we are not accountants, so check anything borderline with yours. The Autumn Budget is on 28 October 2026, and the Association of Taxation Technicians has asked for the staff limit to rise to £70 and the directors' cap to £425. Nothing has been announced, and we will update this guide if the limits change.

Three £50 limits, side by side

Staff gift (the employee's tax) Client gift (your tax deduction) VAT on business gifts
What the £50 covers Each gift, including VAT This gift plus your other gifts to that person in the accounting period (the tax year for sole traders and partnerships), not counting food, drink, tobacco or vouchers All your gifts to that person in any 12 months, excluding VAT
If you go over The whole gift is taxable, not just the excess The cost is not deductible Output VAT is due on the total cost of the gifts
Food, drink and vouchers Allowed, but not cash or a cash voucher Never deductible as a client gift Gifts of goods follow this rule; vouchers have their own VAT rules
Logo needed? No Yes, a conspicuous advert on the gift itself No
Where the rule is ITEPA 2003 s323A; HMRC EIM21864 CTA 2009 s1300; ITTOIA 2005 s47; HMRC BIM45070 HMRC VAT Notice 700/7, para 2.3

Staff gifts: the trivial benefits exemption

HMRC calls a small perk for an employee a trivial benefit. If it meets all four conditions, there is no tax or National Insurance to pay and nothing to report:

  • it costs £50 or less per person, including VAT
  • it isn't cash or a cash voucher
  • it isn't a reward for the employee's work or performance
  • the employee isn't entitled to it under their contract, including a salary sacrifice arrangement

Four details catch people out.

The limit is a cliff, not an allowance. HMRC's guidance says that if a benefit costs more than £50, the full amount is taxable, not just the excess. A £52 gift is taxed on £52.

It applies per gift, not per year. Most employees can receive any number of trivial benefits, though HMRC says benefits given regularly or frequently should be checked for a link to the employee's work. The exception is a director of a close company: their trivial benefits, including any given to their family or household, are capped at £300 a tax year. GOV.UK describes a close company as a limited company run by five or fewer shareholders; the legal test is a little wider, so most owner-managed limited companies count.

Group gifts can be averaged. Where it's impracticable to work out each person's cost, HMRC accepts the average cost per head. Its own example is 100 Christmas turkeys bought in bulk for £4,500, which averages £45 each and so qualifies. Where each person's cost is easy to work out, the actual cost applies.

The reason for the gift matters. HMRC's example of a gift that qualifies is a £30 Christmas present given to all staff every year, regardless of performance. Its example of one that fails is £25 vouchers given to call-centre staff who hit weekly targets. A gift for everyone at Christmas passes; a prize for results doesn't.

A shop gift card can be a trivial benefit if it can't be exchanged for cash, but HMRC treats top-ups as part of the same benefit: a £10 card topped up seven more times has cost £80, and fails.

On your own side of the ledger, HMRC's business income manual confirms the cost of gifts to your employees is deductible from trading profits, as long as they aren't incidental to gifts for other people.

Round oak Christmas bauble, 10cm across, laser engraved and hung on a ribbon, a typical staff Christmas gift

Client gifts: why a logo coaster can be deductible and a hamper can't

Business gifts are normally treated like entertaining, so their cost isn't deductible. The law has a few exceptions. The one that matters for client gifts, in section 1300 of the Corporation Tax Act 2009 (section 47 of ITTOIA 2005 for sole traders and partnerships), is a gift that carries a conspicuous advertisement for your business, unless:

  • the gift is food, drink, tobacco, or a token or voucher exchangeable for goods, or
  • the gift, together with your other gifts to the same person (not counting food, drink, tobacco or vouchers), costs more than £50 in the accounting period (the tax year for unincorporated businesses)

HMRC's own examples of allowable gifts are diaries, pens and mouse mats, and its guidance adds that the advertisement should be on the gift itself, not just on the wrapping. That has two practical consequences.

A hamper is never deductible as a client gift, however little it costs and whatever is printed on the box. Food, drink and tobacco are excluded outright. Adding an engraved logo tag doesn't help either: the contents are still food and drink.

A durable item with your logo on it can be. A coaster, keyring or bauble engraved with your logo fits the same pattern as HMRC's examples: an object that carries your name and stays in use. Put the logo on the front where it will be seen, because the rule asks for a conspicuous advertisement. Keep each client's total at £50 or less for the period, counting every other branded gift you give them. Food, drink and vouchers don't count towards the £50, because they are never deductible anyway.

A gift that fails the test can still be given. Its cost is simply added back when your taxable profit is worked out. And the trivial benefits exemption doesn't help here: it covers your own employees, not clients.

Round and square oak coasters laser engraved with a business logo, a typical client gift

VAT: a third £50, and it covers staff too

If you're VAT-registered, gifts of goods have their own rule in HMRC's VAT Notice 700/7. HMRC defines a business gift as a gift of goods made in the course of promoting your business, for which you were entitled to reclaim the VAT on its purchase. HMRC's list includes goods given to customers as a thank-you, items given to trade customers, and long-service awards and retirement gifts.

You don't have to account for VAT on business gifts to the same person as long as the total cost doesn't exceed £50, excluding VAT, in any 12-month period. Go over that, and you normally have to account for output VAT on the total cost of all the gifts.

Notice how this differs from the other two limits: it excludes VAT, it runs over any 12 months rather than the tax year or accounting period, and it applies to every recipient, employees included. The Association of Taxation Technicians has pointed out the mismatch: an employee can receive several tax-free trivial benefits in a year, but once their combined gifts of goods pass £50, excluding VAT, in 12 months, VAT may become due.

Long-service awards: a separate, larger exemption

An award for long service isn't a trivial benefit, because it recognises the employee's service. It has its own exemption instead. A non-cash award is tax-free if it marks at least 20 years' service with you, it's worth no more than £50 for each year of service, the employee hasn't had a long-service award from you in the previous 10 years, and it isn't provided through salary sacrifice. GOV.UK's example is an award worth up to £1,000 for 20 years' service.

Our engraved presentation clock is designed for this: a 30cm wall clock in 4mm FSC-certified oak veneered MDF, engraved with a dedication such as the recipient's name and years of service, and your logo if you want it.

30cm oak presentation wall clock laser engraved with text and a logo

The Christmas party is a different exemption

A staff party isn't a gift and has its own exemption. It applies to an annual event, such as a Christmas party or summer barbecue, that is open to all your employees (or all those at one location) and costs £150 or less per head in total across the year's annual events. The details are on GOV.UK's page on social functions and parties, linked below.

A worked example

A company with 40 staff and 25 regular clients orders for Christmas:

  • Staff: an engraved bauble for every employee with their name on it, given to everyone regardless of performance. Each costs well under £50 including VAT, isn't cash, isn't a reward for results and isn't contractual, so each is a trivial benefit: no tax, no National Insurance, nothing to report, and the cost is deductible. If any of the 40 is a director of a close company, their bauble also counts towards their £300 annual cap.
  • Clients: an oak coaster with the company logo engraved on the face. It isn't food or drink, the advert is on the gift itself, and no client receives more than £50 of gifts from the company in the period, so the cost is deductible.
  • VAT: no recipient gets more than £50 of gifts, excluding VAT, in 12 months, so no output VAT is due on them.

Swap the coasters for a £40 hamper and the client side changes completely. The hamper is still under £50, but food and drink are never deductible as client gifts, so the cost of all 25 is added back.

What we make that fits each rule

Each of the four products linked above costs less than £50 per item. Colour or black and white logos both work. We will convert your logo for engraving. If there is a problem, we will get in touch. Bulk discounts apply automatically at checkout, counted per product: 10% from 20, 15% from 50, 20% from 100, 25% from 250, 30% from 500 and 35% from 1,000. For delivery by 1 December, order by Friday 13 November 2026.

All items are made to order. Dispatch time is shown at checkout. UK orders via Royal Mail Tracked 24. International via Royal Mail International Tracked.

Frequently asked questions

Is a Christmas gift to an employee taxable?
Not if it is a trivial benefit: it costs £50 or less including VAT, isn't cash or a cash voucher, isn't a reward for work or performance, and isn't part of their contract. If it costs more than £50, the whole amount is taxable, not just the part over £50.

How many tax-free gifts can I give an employee in a year?
There is no set limit on the number of trivial benefits for most employees, as long as each one meets the conditions, though HMRC looks harder at benefits given regularly or frequently. Directors of close companies are capped at £300 of trivial benefits a tax year, including gifts to their family or household. If you're VAT-registered, VAT may be due once one person's gifts pass £50, excluding VAT, in 12 months.

Are Christmas hampers for clients tax-deductible?
No. Gifts of food, drink or tobacco, and vouchers exchangeable for goods, are never deductible as client gifts, whatever they cost and however they are branded. A non-food gift can be deductible if it carries a conspicuous advert for your business and your gifts to that client, not counting food, drink or vouchers, total £50 or less in the period.

Does my logo have to be on the gift itself?
For a client gift to be deductible, yes. HMRC's guidance says the advertisement should be on the gift itself, not just on the wrapping. An engraved logo on the face of a coaster, keyring or bauble is on the gift itself. Staff gifts don't need a logo at all.

Is an employee of the year award a trivial benefit?
No. A gift given in recognition of an employee's work or results fails the trivial benefits test, so it is taxable unless another exemption applies. Employers can settle the tax on minor items such as incentive awards through a PAYE Settlement Agreement.

Also see: corporate Christmas gifts: what gets kept, and when to order, corporate Christmas bauble gifting: a planning guide, when UK businesses order and wooden Christmas products for business.

Sources

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