Why am I being charged Class 2 National Insurance in my 2024/25 Self-Assessment?

Some self-employed taxpayers are mistakenly charged Class 2 NICs due to an HMRC IT issue. If your profits exceed £12,570, you should only pay Class 4 National Insurance, not Class 2. Always check your self-assessment 2024/25 calculation to ensure it is correct.

Do I need to pay Class 2 NICs through Self-Assessment for 2024/25?

No. From 6 April 2024, Class 2 NICs are voluntary for self-employed individuals with profits below £6,725. Voluntary contributions can help build qualifying years for your State Pension, but if your profits are above this threshold, Class 2 should not appear on your self-assessment.

What should I do if my Self-Assessment shows the wrong Class 2 NIC charge?

If you’ve filed your 2024/25 self-assessment and notice an incorrect Class 2 NIC charge, contact HMRC to request a correction. If you haven’t filed yet, consider waiting until HMRC resolves the issue (expected by September 2025).

What happens if I already paid the incorrect Class 2 NICs through Self-Assessment?

HMRC will refund or credit any incorrect Class 2 NIC payments to your self-assessment account once the error is fixed. Keep proof of payment and HMRC correspondence for reference.

When is the deadline for submitting my 2024/25 Self-Assessment?

The online filing and payment deadline for 2024/25 self-assessment is 31 January 2026. The HMRC Class 2 NIC error does not affect this deadline. Submit on time to avoid late filing penalties.

VAT on Entertainment: Updated UK Rules & Guidance 2025

Intricate Rules on VAT ON ENTERTAINMENT: What You Need to Know

VAT ON ENTERTAINMENT is one of those areas of VAT legislation that often confuses businesses.

Can you reclaim the VAT you incur when entertaining clients, staff, or third parties? The short answer is: sometimes — but with many caveats, restrictions, and conditions.

In this updated guide, we explain how things stand as of 2025, highlight rule changes since January 2021, and help you avoid costly mistakes.

What Counts as “Entertainment” for VAT Purposes?

“Entertainment” in VAT terms typically includes hospitality, leisure, or recreation provided to others. Examples include:

Meals, drinks, refreshments
Theatre, concert or sports tickets
Corporate hospitality days
Club membership fees or leisure activities

The line between subsistence (meals taken while working away from your normal place of business) and entertainment is critical, because VAT treatment differs.

According to VAT Notice 700/65, input tax incurred on entertaining non-employees is blocked (i.e. you cannot claim it), except in narrow circumstances (for example, overseas customers, or where a strict business purpose is demonstrated)

Since Brexit, and from January 2021, the UK no longer follows the EU’s “One Stop Shop” rules for digital services, but that change does not directly affect VAT ON ENTERTAINMENT itself.

Claiming VAT ON ENTERTAINMENT for Subsistence vs Hospitality

VAT ON ENTERTAINMENT — Subsistence vs Hospitality

When an employee travels and incurs costs for meals or accommodation, that is treated as “subsistence,” not business entertainment, so VAT can typically be reclaimed (subject to usual rules)

For example, if you’re away from your normal office and have a working lunch, the VAT on that meal is generally allowable as input tax. The key is that it’s genuinely a business necessity, not a perk.

But when food, drink or hospitality is provided in the context of entertaining clients or non-employees, that is subject to the business entertainment rules, and the VAT is normally disallowed (i.e. cannot be reclaimed).

Infographic illustrating the VAT treatment of entertainment expenses in the UK as of 2025, highlighting distinctions between subsistence, staff events, and client entertainment, along with guidelines for VAT recovery and apportionment.

Staff Entertainment Versus Client Entertainment

Claiming VAT ON ENTERTAINMENT for Staff Events

VAT ON ENTERTAINMENT for staff-only events (e.g. Christmas parties, team building) is treated differently from client hospitality. HMRC allows full recovery of input tax when the entertainment is exclusively for employees (excluding directors/partners), provided it is for business purposes (e.g. boosting morale, staff rewards) and not treating them as hosts to non-employees

However, if non-staff (e.g. clients, guests) attend the event, you must apportion the cost: only the portion attributable to the staff benefit is reclaimable, and the rest is blocked under the business entertainment rules.

If staff and non-staff attend, you should:

Split attendees into staff vs non-staff
Calculate cost per head
Multiply the per-head cost by the staff headcount
Claim VAT only on that staff portion

(This method is suggested in more recent HMRC guidance examples)

VAT ON ENTERTAINMENT for Clients, Customers, Suppliers

When entertaining non-employees (clients, suppliers, prospects), VAT ON ENTERTAINMENT is most often non-recoverable.

HMRC considers most such hospitality to provide a private benefit and not to be strictly necessary for business.

Where HMRC allows recovery (rarely), an output tax charge may be required (i.e. you must treat the benefit as a supply and account for VAT on it) to neutralise the input tax you claimed.

There is still a special exception: if the client is an overseas customer (not resident or trading in the UK) and the entertainment is strictly business-oriented (e.g. a working lunch), input VAT may be claimable, subject to private use restrictions.

Mixed Events & Hosting Staff

When Employees Act as Hosts & Mixed Events

If employees are present and act as hosts to non-employees, then the VAT on their costs may be blocked, even though those employees are themselves entitled to recovery. In effect, the rules treat them as part of the business entertainment.

Conversely, if staff attend purely as guests (e.g. reward, celebration) and do not host clients, then that portion may remain recoverable. Mitchell Charlesworth+1

In a mixed event, always separate and apportion carefully, and document the reasoning, headcounts, and cost apportionment.

Changes Since January 2021 and Practical Considerations

Since January 2021, there have been broader VAT changes (especially post-Brexit) that affect business operations, though not wholesale changes specifically to VAT ON ENTERTAINMENT. Some relevant developments:

From January 2021, the UK is free to set its own VAT rules outside the EU structure.
The rules on digital services and the One-Stop Shop (OSS) no longer apply in the UK; however, these are not directly relevant to entertainment treatment.
Businesses must remain compliant with Making Tax Digital (MTD) for VAT — meaning records and claims (including those involving VAT ON ENTERTAINMENT) must be maintained via digitally linked software.
There has been ongoing HMRC scrutiny of VAT on entertainment and hospitality claims, so documentation, separation of client vs staff costs, and clear justifications are more important than ever.

In practice, many businesses err on the side of caution and block recovery entirely on client hospitality, or only claim staff portions, to avoid penalties or challenge from HMRC.

How Trueman Brown Can Help You with VAT ON ENTERTAINMENT

Navigating VAT ON ENTERTAINMENT can be fraught with pitfalls.

At Trueman Brown, we help businesses like yours:

Review and categorise entertainment expenditures
Determine which costs qualify for VAT recovery
Apportion mixed events correctly
Prepare supporting documentation and audit trails
Advise on risk mitigation and defend claims with HMRC if challenged

If you’d like help applying these rules to your business, contact us:

Email: mark@truemanbrown.co.uk
Phone: 01708 397262

We’ll be pleased to assess your situation and guide you safely through the complexities of VAT ON ENTERTAINMENT.

FAQ: VAT ON ENTERTAINMENT

Q: Can I always reclaim VAT ON ENTERTAINMENT for staff parties?
A: Yes, provided the event is exclusively for employees (excluding directors/partners), serves a business purpose (morale, reward), and no non-employees attend. Otherwise you must apportion.

Q: If clients attend an event with staff, can I reclaim any VAT ON ENTERTAINMENT?
A: Only the portion attributable to staff may be reclaimed (not that for clients) — and only if staff are not acting as hosts. Clear apportionment and documentation are essential.

Q: Can I reclaim VAT ON ENTERTAINMENT for client meals?
A: Generally no. HMRC treats most client hospitality as giving a private benefit, so input tax is blocked. Occasionally, where an overseas client is involved under strict business purpose, limited reclaim may be possible.

Q: Does Brexit or rule changes since 2021 affect VAT ON ENTERTAINMENT?
A: Not directly. The fundamental business entertainment rules remain intact. But you must now operate fully under UK VAT rules (no EU OSS, need digital records under MTD) and there is greater HMRC scrutiny.

Q: What records do I need to support a claim for VAT ON ENTERTAINMENT?
A: Keep valid VAT invoices, attendance lists (staff vs non-staff), cost breakdowns, explanation of business purpose, and internal communications or agendas. These should be retained for at least 4 years (or longer, depending on your business).

Q: Can directors or sole traders recover VAT ON ENTERTAINMENT given to themselves?
A: No. If entertainment is solely for directors, sole traders, or partners, HMRC generally disallows recovery in full — these are not considered legitimate staff entertainment.