Are Gifts for Clients Tax Deductible

Are gifts for clients tax deductible in the UK? Understand HMRC rules, limits, and what you can claim to avoid unexpected tax bills.

Giving gifts to clients can be a thoughtful way to show appreciation or maintain strong business relationships, but not all business gifts qualify for tax relief. In the UK, HMRC sets strict rules on what is and isn’t allowable as a tax-deductible business expense. This article explains those rules clearly so you can make informed, tax-efficient decisions when giving gifts to clients.

Can You Deduct the Cost of Client Gifts?

In most cases, gifts to clients are not tax deductible. HMRC generally treats business gifts as entertaining rather than legitimate business expenses, and entertaining costs are not allowable for tax purposes. However, there are some narrow exceptions where client gifts can be claimed, provided they meet specific criteria.

To qualify for tax relief, a client gift must:

  • Cost no more than £50 per person per tax year

  • Carry a conspicuous business advertisement (like your logo)

  • Not be food, drink, tobacco, or vouchers that can be exchanged for goods or cash

Failing to meet any one of these conditions will usually mean the gift cannot be claimed as an allowable business expense.

What Counts as a ‘Conspicuous Advertisement’?

The gift must include clear and visible promotion of your business. This could be your company name, logo, or strapline printed directly on the item. Subtle branding, like a logo on packaging, might not be sufficient. The idea is that the gift doubles as a form of marketing, which is why HMRC allows a tax deduction.

Examples of allowable promotional gifts include:

  • Branded pens, mugs, or calendars

  • USB sticks with your logo

  • Diaries or notepads featuring your company name

The branding must be permanent and part of the product itself. Items like plain wine bottles with a branded label or tag attached would not qualify.

Why Food and Drink Gifts Are Not Deductible

Even if you include your logo, gifts of food, drink, tobacco or vouchers are always disallowed by HMRC. This includes items like:

  • Hampers

  • Boxes of chocolates or wine

  • Restaurant gift vouchers

  • Branded snacks or drinks

These are all considered to be entertainment expenses, not marketing, so they fall outside of the deductible category.

What Happens If You Exceed the £50 Limit?

The £50 limit is per client, per tax year. If you spend more than £50 (including VAT) on a single gift or multiple gifts to the same client in the same year, you cannot claim any of the cost back as an allowable expense. There is no partial relief.

It is important to track cumulative spend on gifts for each client to avoid crossing the threshold and losing the tax deduction entirely.

Are Gifts to Suppliers or Other Third Parties Allowed?

The same £50 rule applies when gifting to suppliers or other business contacts. However, if the recipient is not a client or potential client (for example, a journalist, supplier, or business associate), the logic is the same. You can claim the cost only if:

  • It does not exceed £50

  • It carries a clear promotional message

  • It is not food, drink, tobacco or vouchers

Even then, HMRC may closely examine your reasons for the gift if audited. Be prepared to justify how it relates to your business promotion or development.

VAT on Business Gifts

VAT rules also apply to gifts. If you are VAT registered and reclaim input VAT on business purchases, you can only reclaim VAT on gifts where:

  • The total cost to one person over 12 months does not exceed £50

  • The gift meets the business promotion requirements outlined above

If you exceed the £50 limit, you must account for output VAT as though you had sold the item, even if you gave it away for free. This means you’ll need to declare VAT on the value of the gift in your VAT return.

How to Record Client Gifts in Your Accounts

If the gift qualifies under HMRC’s rules, it can be recorded in your accounts as advertising or promotional expenditure. Make sure to:

  • Keep receipts for all purchases

  • Note the recipient’s name and business

  • Record the reason for the gift (e.g. relationship building, promotion)

This will help support your claim in the event of an HMRC enquiry. If the gift does not qualify, it should be recorded as client entertaining, which is not tax deductible.

Common Mistakes to Avoid

Many business owners get caught out by assuming that any gift given in a business context is deductible. To avoid trouble with HMRC:

  • Do not try to deduct costs for gifts that exceed £50

  • Do not claim relief on food, drink, tobacco or vouchers

  • Do not claim gifts without a permanent and visible business logo

  • Do not split up gifts or try to disguise them as office stationery or supplies

These mistakes can lead to disallowed expenses, VAT penalties or even HMRC enquiries.

What About Gifts to Employees?

Gifts to employees follow a different set of rules. These are covered under the trivial benefits exemption, which allows you to give staff gifts costing £50 or less without tax or National Insurance implications. However, this is separate from client gifting and has its own conditions.

If you are considering both client and staff gifts, it’s important to understand the differences in how they are treated for tax and VAT purposes.

Summary: Are Gifts for Clients Worth It?

While you can give tax-deductible gifts to clients in the UK, the rules are strict and the qualifying criteria narrow. For a gift to be deductible, it must cost no more than £50, not include food or drink, and prominently promote your business. Even then, there are VAT implications if you exceed the limit.

If your goal is to build goodwill or impress a client, a more generous gift may still be worthwhile. Just be aware that you might not be able to claim the cost through your business accounts.

When in doubt, check the rules carefully and speak to your accountant. Staying compliant means you avoid unexpected tax liabilities and keep your business expenses in good order.