Yes in both countries, and in both the answer arrives with a cap and a set of conditions. The two systems start from opposite ends. In the United States a business gift is deductible, and the IRS caps it at $25 per recipient per tax year. In the United Kingdom a business gift is disallowed by default, treated the same way as business entertaining, and only becomes deductible inside a narrow exception built around advertising and a £50 limit. Most pages ranking for this question answer for the US alone without saying so, leaving a UK reader with a confident number that does not apply to them.
One thing first. This is a plain summary of published rules, not tax advice. We sell tree gifts, we are not accountants, and the right answer for your business depends on facts we cannot see from here. Take anything below to whoever signs off your return before you act on it.
If you are reading this because a gifting budget is sitting in front of you waiting for approval, you can see corporate Tree Gifts while you work through the rules.
Key Takeaways
- United States: business gifts are deductible up to $25 per recipient per tax year, per IRS Publication 463, the version for preparing 2025 returns.
- United States: engraving, packaging, insuring and mailing sit outside the $25 where they do not add substantial value.
- United States: items costing $4 or less carrying your name permanently and distributed widely are not counted as gifts, and nor are signs and display racks for a customer’s premises.
- United Kingdom: business gifts are disallowed by default and treated like business entertaining, per HMRC business gifts guidance.
- United Kingdom: the exception at HMRC small gifts guidance needs a conspicuous advertisement on the gift, a running cost of no more than £50 to that recipient in the tax period, and no food, drink, tobacco or vouchers exchangeable for goods.
- Staff are a separate question: UK staff gifts are deductible for the business under HMRC employee gifts guidance, while whether the employee is taxed runs on the trivial benefits rules instead.
- Tree Gifts carry no tax advantage. They are ordinary business gifts under the same rules as anything else you send.
What the IRS says about business gifts in the United States
The rule sits in IRS business-gift guidance. The version live today is marked “For use in preparing 2025 Returns”, and chapter 3 carries the sentence everyone is looking for: “You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year.”
Per person, per year. Not per gift, and not per company. Send the same client four things in a year and the $25 covers all four. A gift routed through a business still lands on a person: one intended for the eventual personal use of a particular person, or a limited class of people, is an indirect gift to those individuals, and a gift to a customer’s family member is generally an indirect gift to the customer. If you and your spouse both give you count as one taxpayer, as do a partnership and its partners.
Publication 463 works it through with an example. A couple send three gourmet gift baskets to a company they sell to, at $80 each, $240 in total. Three of that company’s executives take the baskets home for their families. The deduction is $75, the $25 limit multiplied by three.
What sits outside the $25
Incidental costs are not counted. The publication names “engraving on jewelry, or packaging, insuring, and mailing” as generally outside the cost of a gift for the purposes of the $25 limit, with one qualifier: a cost is incidental only if it does not add substantial value. Gift wrapping is incidental. An ornamental basket is not, if it is worth a lot next to the fruit inside. Worth knowing before you compare corporate gift boxes on price.
Two categories are not treated as gifts at all. First, an item costing $4 or less that has your name clearly and permanently imprinted on it and is one of a number of identical items you widely distribute, with pens, desk sets, and plastic bags and cases as the examples. Second, signs, display racks or other promotional material for use on the recipient’s business premises. That is the line between a gift and a branded promotional item, changing which rule applies rather than how much you can claim.
Gift, or entertainment
Publication 463 carries a tie-breaker: “Any item that might be considered either a gift or entertainment will generally be considered entertainment.” That matters, because in its own words entertainment expenses are generally nondeductible. Its worked example is blunt. Two concert tickets for you and a client at $200: “Your deduction is zero because no deduction is allowed for entertainment expenses.”
One carve-out runs the other way. Packaged food or beverages you intend the customer to use at a later date are treated as a gift. A hamper posted to someone is a gift. Sitting next to them at the game is entertainment.
On records, the publication does not ask you to name every recipient. A general listing is enough “if it is evident that you aren’t trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person”.
What HMRC says about business gifts in the United Kingdom
The UK starts from no. HMRC business gifts guidance, updated 4 August 2026, puts it in one line: “Business gifts are not allowed as a deduction against profits. The legislation treats gifts in the same way as business entertaining expenditure.” The legislation is section 45 of the Income Tax (Trading and Other Income) Act 2005 for unincorporated businesses, and section 1298 of the Corporation Tax Act 2009 for companies.
HMRC also defines the word. A gift is “something that is given to a person without receiving anything in exchange”. That takes out things which only look like gifts: flowers handed over with a new car were paid for as part of the price, and gifts to customers who buy a certain level of goods are discounts on a sale.
The £50 advertising exception
HMRC small gifts guidance, also updated 4 August 2026, sets out the exception most businesses are actually asking about. “Gifts, which contain a conspicuous advertisement for the trader are generally allowed.” Then it takes it back in two places. The expenditure is not allowable if:
- “the gift is food, drink, tobacco or a token or voucher exchangeable for goods”, or
- “the cost of the gift, together with the cost of any other gifts (except food, drink, tobacco or a token or voucher exchangeable for goods) to the same recipient in the relevant tax period, exceeds £50.”
The relevant tax period is the tax year for unincorporated businesses and the accounting period for companies. HMRC names diaries, pens and mouse mats as common allowable gifts, and adds a detail that quietly disqualifies a lot of gifting: “The advertisement should be on the gift itself, and not just on the wrapping.” If you send corporate gifts with a logo, read that sentence twice.
Read the two conditions together and the shape is clear. A £45 branded item can qualify. A £45 bottle of wine cannot, because drink is excluded by category whatever is printed on it, and the same catches a Christmas hamper full of food. Nor can a £45 gift card. And a second branded gift to the same person in the same period is measured against the first, because the £50 is cumulative per recipient rather than per item.
Gifts to your own staff are a different question
This is where most of the confusion sits, in both countries. Client gifts and employee gifts run on separate rules. One asks what the business can deduct. The other asks whether the recipient is taxed on it.
United States
For employees the guide is IRS fringe-benefit guidance, marked “For use in 2026”. It sets out the de minimis benefit: property or a service of so little value that accounting for it would be unreasonable or administratively impracticable. Holiday or birthday gifts other than cash, with a low fair market value, are on its list of examples, along with occasional parties or picnics for employees and their guests.
One sentence catches more employers than any other: “Cash and cash equivalent fringe benefits (for example, gift certificates, gift cards, and the use of a charge card or credit card), no matter how little, are never excludable as a de minimis benefit.” A $10 gift card is not a small kindness in tax terms. It is pay.
Length of service and safety awards run on their own track. Publication 15-B limits the deduction for employee achievement awards given to any one employee during the tax year to $400 for awards that are not qualified plan awards, and $1,600 for all awards, qualified or not. The exclusion does not cover cash, cash equivalents, gift cards, gift coupons or gift certificates.
United Kingdom
The employer side is short. HMRC employee gifts guidance, updated 4 August 2026, says the cost of gifts provided to the employees of the trader is deductible from trading profits, so long as those gifts are not also provided to others and are not incidental to gifts provided to others. The blanket disallowance on client gifts does not reach your own team, which is one reason employee appreciation gifts sit in a different box.
Whether the employee pays tax is a separate test. The trivial benefits exemption at section 323A of ITEPA 2003, set out in HMRC trivial benefits guidance and updated 11 September 2026, exempts a benefit from tax as employment income when all four of these hold: the cost of providing it does not exceed £50, it is not cash or a cash voucher, the employee is not entitled to it under any contractual obligation including salary sacrifice, and it is not provided in recognition of particular services performed as part of their duties. GOV.UK carries the same four conditions in its guide to tax on trivial benefits. Where the employer is a close company and the recipient is a director or other office holder, the exemption is capped at a total cost of £300 in the tax year.
That last condition trips people up. A gift given because someone did well is a reward for their work, and a reward for work is not a trivial benefit.
The staff party sits under another rule. Section 264 of ITEPA 2003 exempts an annual party or similar annual function available to employees generally, and HMRC annual functions guidance, updated 11 September 2026, sets the figure: “If the employer provides one annual function for employees no charge to tax arises if the cost of the event per head does not exceed £150.” GOV.UK repeats the test in its guide to social functions and parties. HMRC is emphatic that the £150 is an exemption, not an allowance. Where a function falls outside it, employees are chargeable on the full cost per head, not just the excess.
What this means when a gifting budget lands on your desk
Three things fall out of the rules above, and they are worth knowing before the numbers are set.
The US figure is per person and cumulative. The $25 covers everything one recipient got from you that year, including gifts routed through their employer.
The UK exception turns on the advertisement rather than the sentiment. HMRC wants the advert on the item itself, and the running total under £50 for that recipient in the period. Food, drink and vouchers are outside it altogether.
Staff and clients are different questions. The employee’s tax position is not the same question as the employer’s deduction.
None of that tells you what to do. It tells you what to ask. Bring the country, the recipient, the cost per head, and whether the item carries your branding, and your accountant can settle it quickly. What to send in the first place is a different problem, and that one is about corporate gift etiquette rather than tax.
How US and UK business gift tax rules apply to Tree Gifts
Plainly: a Tree Gift is an ordinary business gift and carries no special tax treatment in either country. It sits under the same rules as a bottle of wine or a branded notebook, and where it lands depends on the country, the recipient and the cost, not on the tree. If anyone selling you a sustainability gift offers a tax benefit as a reason to buy, ask which page of the IRS or HMRC guidance says so.
A Tree Kit gives the recipient seeds to grow at home. Its purchase also funds a tree through ForestNation’s planting programme in Tanzania. You can read the FN impact methodology for how programme outcomes are estimated and reported, or send a Gift Story, which delivers your message by email and funds planting separately. The email can arrive before planting is fulfilled and recorded. When the budget clears, gift a forest to your business.
Frequently asked questions
What records should a US business keep for gifts?
Keep timely records showing the business purpose, a description of the gift, the amount spent and the date. The IRS guidance states these record-keeping elements and applies the limit per person during the tax year.
Where do you deduct business gifts on Schedule C?
For the 2025 US tax year, a sole proprietor reports deductible business-gift expenses on Schedule C (Form 1040), line 27b, under Other Expenses. IRS Publication 463 (2025) names gift expenses and line 27b; the 2025 Schedule C instructions identify line 27b as Other Expenses. This is the form location, not a ruling on whether a particular gift qualifies; check the current-year instructions and your facts with a tax adviser.
Research and References
- IRS business-gift guidance, for use in preparing 2025 returns. The $25 limit, incidental costs, the $4 and display-rack exceptions, the gift or entertainment rule, and record keeping.
- IRS fringe-benefit guidance, for use in 2026. De minimis benefits, the cash and gift card rule, and the $400 and $1,600 achievement award deduction limits.
- HMRC business gifts guidance, updated 4 August 2026. The general disallowance and the definition of a gift.
- HMRC small gifts guidance, updated 4 August 2026. The conspicuous advertisement condition, the £50 limit and the excluded categories.
- HMRC employee gifts guidance, updated 4 August 2026. Staff gifts as an allowable deduction.
- HMRC trivial benefits guidance, updated 11 September 2026, and GOV.UK on tax on trivial benefits. The four conditions and the £300 close company director cap.
- HMRC annual functions guidance, updated 11 September 2026, and GOV.UK on social functions and parties. The £150 per head exemption under section 264 ITEPA 2003.
