Client gifting is one of the most misunderstood areas of UK business tax. Many business owners either avoid gifts entirely out of uncertainty, or claim deductions incorrectly and create compliance risk.
This guide sets out exactly how HMRC treats business gifts, which gifts qualify for full deduction, which are limited, and how the type of gift you send affects your tax position.
Note: This is general guidance. Always confirm your specific circumstances with a qualified accountant or tax adviser.
HMRC's Basic Position on Business Gifts
HMRC distinguishes sharply between business gifts and business entertainment. Entertainment — taking clients to events, meals, sporting occasions — is explicitly not deductible for corporation tax. Gifts are different, and the rules are more favourable.
The key question HMRC asks is whether the gift is made 'wholly and exclusively' for business purposes. If it is, and it meets certain criteria, it's deductible as a business expense.
The £50 Rule and the Advertising Exemption
The two routes to deductibility
Route 1 — The £50 limit: Gifts to any one person costing £50 or less per tax year are deductible as a business expense, provided they are not food, drink, tobacco, or vouchers exchangeable for those items.
Route 2 — The advertising exemption: Gifts that 'bear a conspicuous advertisement' for your business have no £50 cap and are fully deductible, provided they're not food, drink, tobacco, or vouchers for those items. A gift card branded with your company logo qualifies under this route.
This is the key distinction most businesses miss. An unbranded gift hamper is limited to £50 per person. A branded digital gift card with your logo has no cap and is fully deductible as advertising expenditure.
Branded business gifts — those carrying your company's logo or advertising message — are treated as advertising expenditure by HMRC and are not subject to the £50-per-person annual limit.
What HMRC Explicitly Excludes
Even with branding, certain gift types are never deductible: gifts of food, drink, or tobacco (even if branded), and vouchers or gift cards that can be exchanged for food, drink, or tobacco.
This means a branded hamper containing wine or food is not deductible. A branded gift card that can be redeemed across non-food/drink categories is deductible under the advertising exemption.
CustoThanks gift cards are branded with your company logo and offer a curated selection across home, wellbeing, lifestyle, and experience categories — not food or drink — which supports their treatment as deductible advertising expenditure.
VAT on Business Gifts
A separate but related consideration
If you're VAT-registered, there's a separate rule to be aware of: giving away goods as gifts is treated as a taxable supply if the total cost of gifts to any one person exceeds £50 in a 12-month period, and you reclaimed input VAT on the goods.
For digital gift cards, the VAT treatment depends on whether the card is single-purpose (one VAT rate) or multi-purpose (VAT due on redemption). Most curated gift platforms use multi-purpose vouchers, meaning VAT is accounted for at the point of redemption by the retailer, not at the point of issue.
Speak to your accountant about how this applies to your specific gifting model and VAT registration.
Gifts to Employees vs Gifts to Clients
Different rules apply to employee gifts. The 'trivial benefits' exemption allows tax-free gifts to employees of up to £50 per occasion (annual limit of £300 for directors of close companies), provided they are not cash or cash vouchers, not a reward for work performance, and not contractually required.
Client gifts follow the business gift rules above — not the trivial benefits exemption. Don't conflate the two when assessing deductibility.
Record-Keeping Requirements
HMRC expects you to keep records substantiating any deduction. For client gifts, that means: a record of who received the gift, the cost, the date, and the business purpose. For higher-volume gifting programmes, a simple log or export from your gifting platform will satisfy this requirement.
CustoThanks provides a dashboard showing every gift sent, to whom, and at what value — which serves as a ready-made record for your accountant.
The HMRC rules on client gifts are more favourable than most business owners realise — particularly for branded gifts, which have no annual per-person limit. The key is using gifts that qualify under the advertising exemption and keeping appropriate records.
If you're currently sending unbranded physical gifts and limiting yourself to £50 per client, switching to a branded digital gifting approach may significantly improve both the client experience and your tax position. Talk to your accountant about the specifics.
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