Can I claim gifts and entertaining clients as a sole trader?

No for entertaining customers, suppliers or contractors, or for food and drink gifts to them. In 2026-27 you can claim branded gifts if a person's total is £50 or less in the tax year, and staff entertaining for employees.

The rules are in sections 45 to 47 of the Income Tax (Trading and Other Income) Act 2005, as GOV.UK and HMRC's Business Income Manual explain them, checked on 17 October 2026.

Entertaining is blocked, even for good business reasons

Section 45 says no deduction is allowed for providing entertainment or gifts in connection with the trade, and that entertainment includes hospitality of any kind. HMRC's manual says the purpose is irrelevant: a client lunch can be wholly for the business and still be refused. The person entertained can be a customer, a potential customer or anyone else.

Costs around it go too. HMRC's manual names invitations, paying someone to organise it, and paying for customers to travel to a sporting event. GOV.UK adds venue hire and tickets to sporting or music events.

The branded gift exception

Section 47 lets you claim a gift that carries a conspicuous advertisement for your business, unless:

• it is food, drink, tobacco, or a token or voucher exchangeable for goods, or
• your gifts to the same person in the same tax year, leaving out those items, come to more than £50.

HMRC's manual says the advert should be on the gift itself, not just the wrapping, and gives diaries, pens and mouse mats as common examples. GOV.UK adds keyrings. Mugs and calendars are not named, but in our reading they count too.

Because each gift is tested together with all the others, in our reading a total over £50 leaves none of that person's gifts claimable, not just the part above £50. GOV.UK's wording, "the maximum you can claim is £50 per recipient", could be read as a cap instead, and HMRC's manual gives no example.

Common trade situations

Employees and subcontractors

Section 46 allows entertainment provided for your employees, unless it is incidental to entertaining other people. HMRC's manual asks whether you would have paid for it if no guests had come, and treats retired staff and employees' partners as employees. It says employees may have to pay tax on it, which you may need to report. Gifts to employees are allowable on the same basis.

A self-employed subcontractor is not your employee, and HMRC's manual says the staff exception does not cover anyone else's employees either, even if they work only for you. It does accept subsistence where the contract with the labour supplier requires it, and says meals for a self-employed person contracted for a particular piece of work may be treated as part of that contract's cost. There must be a direct link to the work, and the food must not be excessive.

Your own share is a separate point. HMRC's manual says a trader's own food is generally a living cost, because everyone must eat. Its staff pages do not say whether your own place at a staff meal counts, so in our reading leave your share out. Our guide to claiming food and lunch covers meals on jobs away.

Gifts to charity

Section 47 does not block gifts to a charity, but HMRC's manual says a deduction is only due if the gift is wholly and exclusively for the business. The 2025-26 return notes list payments to charities as disallowable in the "other business expenses" box. HMRC's manual adds that a cash gift that is not deductible may get relief through Gift Aid instead.

Where these costs go in your records

GOV.UK says Making Tax Digital (MTD) uses the same categories as Self Assessment, with "Advertising" and "Business entertainment costs" listed separately. The 2025-26 return notes put free samples in the advertising and entertainment box, and say client entertaining must also be shown as disallowable. In MTD you remove disallowable expenses by adjusting the category totals before your tax return.

In our reading, allowable branded gifts belong under advertising, and staff treats under "Wages, salaries, and other staff costs", which the return notes say includes benefits for employees. See our guide to advertising and marketing costs.

HMRC's manual says the cash basis does not usually change which expenses are allowable.

If you are VAT-registered, VAT has its own gift rule. VAT Notice 700/7 says you do not account for VAT on business gifts of goods to the same person costing £50 or less in total, excluding VAT, in any 12-month period.

A plumber's Christmas

A plumber with 2 employees spends this in December 2026:

The fleece line follows our reading of the £50 test. This is an example only.

What this means for you

Treating customers and contractors does not come off your profit. Branded gifts of £50 or less per person, and treats for your own employees, can.

Steps to sort your gift and entertaining costs

1. List each gift and treat with the date, cost and who it was for.
2. Take out anything that is food, drink, tobacco or a voucher, unless it was for your employees.
3. Add up the remaining gifts to each person for the tax year, branded or not, and check none is over £50.
4. Keep entertaining in its own category so it can be shown as disallowable.
5. For subcontractors, check whether food was part of the agreed job.
6. For a charity gift, note the business reason, or see whether Gift Aid fits instead.

The free MTD check shows when MTD starts for you, and the trades section has more guides.