Are Client Gifts Tax Deductible?
- John Gates
- Oct 3
- 3 min read
Updated: Nov 4
Giving gifts to clients is a thoughtful way to show appreciation, strengthen relationships, and keep your business at the front of their minds. But when it comes to tax, many business owners ask the same question: are client gifts tax deductible?
The answer is yes – but only in very limited circumstances. HMRC has strict rules about what counts as a deductible expense when it comes to client gifts, and getting it wrong could mean disallowed expenses and an unexpected tax bill.
In this post, we’ll break down the rules, explain what qualifies, and give practical examples to help you decide what’s allowable.
The General Rule
HMRC does not normally allow a tax deduction for business entertaining costs, and that includes most client gifts. The principle is that entertaining or gifting is not considered an expense incurred “wholly and exclusively” for business purposes.
However, there are exceptions that allow small gifts to clients, provided certain conditions are met.
When Client Gifts Are Tax Deductible
Client gifts can be allowable as a business expense if they meet all of the following conditions:
They cost £50 or less per recipient, per year
This is a strict annual limit. If you spend more than £50 on a gift for one client in a year, the whole amount is disallowed (not just the excess).
The gift must carry a conspicuous advertisement for your business
For example, your business name or logo printed on the item.
The gift cannot be food, drink, tobacco, or vouchers that can be exchanged for goods or cash
These are specifically excluded by HMRC rules. So hampers, wine, champagne, or supermarket vouchers will not qualify.
If all three conditions are met, the gift should be allowable as a deduction against your profits.
Examples of Tax-Deductible Client Gifts
Branded pens, notebooks, or calendars
Coffee mugs with your company logo
USB sticks or power banks printed with your brand
Tote bags with your business name on them
These are low-cost, practical items that promote your business and meet HMRC’s requirements.
Examples of Gifts That Are Not Deductible
Bottles of wine or champagne
Hampers of food or drink
Gift cards or vouchers
Luxury items over £50 in value (such as branded watches, high-end tech gadgets)
Any unbranded items
Even if these strengthen client relationships, they will not be tax-deductible.
VAT on Client Gifts
If your business is VAT-registered, you may also be able to claim back the VAT on client gifts – but there’s a limit.
You can reclaim VAT on gifts to the same person as long as the total cost (excluding VAT) is less than £50 in any 12-month period.
If the value of gifts to the same person goes over this limit, you’ll need to account for output VAT on the total cost of the gifts (not just the excess).
This means you need to keep good records of what you’ve given to each client throughout the year.
Practical Tips for Businesses
Keep gifts simple and branded – Choose low-cost promotional items that promote your business.
Track costs per client – Make sure you don’t go over the £50 limit in a tax year.
Avoid food, drink, and vouchers – However popular these may be, they won’t qualify for tax relief.
Retain invoices and receipts – Evidence is essential in case HMRC ever asks questions.
Conclusion
So, are client gifts tax-deductible? Yes, but only if they are inexpensive, carry your business branding, and are not food, drink, or vouchers.
Anything outside of these rules is treated as entertaining and not deductible for tax purposes.
When in doubt, stick to promotional merchandise – not only will it keep HMRC happy, but it also ensures your clients remember your business every time they use the item.
