Janis Patterson, 64, hoisted up the colourful festive flag which shows Father Christmas and his reindeers flying in front of a moon.
But the mum-of-two was stunned when Broxtowe Borough Council threatened her with prosecution for “the unauthorised display of advertisements”.
The letter, which arrived in the post on December 1, warned her she could face a £2,500 fine if she doesn’t remove the flag by this Thursday (8/12).
It states: “Unfortunately the flag and flagpole in question does not benefit from advertisement consent under the Town and Country Planning (Control of Advertisements) Regulations 2007 and the unauthorised display of advertisements is a criminal offence liable for prosecution.
“This could incur a fine not exceeding £2500 for each advertisement displayed.
“Therefore I must request that the sign by permanently removed within seven days of the day of this letter.
“A compliance check will be made after this time to ensure removal.
“Alternatively an application for advertisement consent would be required by the Local Planning Authority to regularise this.”
Janis, who was a drill sergeant in the Women’s RAF, researched the legality of flying flags outside her home in Chilwell, Nottingham, before hoisting her festive banner.
She initially flew a yellow flag with a smiley face before swapping it for one to mark Remembrance Day last month.
Today (Tue), Janis, who has two grown-up children, said: “I was very upset when I opened the letter threatening me with a fine.
“It says it is an unauthorised display of advertisement and it is a criminal offence and I could be fined £2,500.
“I asked my neighbours if they were okay with it and they said they were.
“I had emailed the council and searched on Google to make sure it was okay.
“I searched Google and the Town and Country Planning Act 1990 and because it was not above 24ft and I wouldn’t be advertising I thought it would be okay.
“I am the daughter of an army officer and was in the WRAF so I’ve always been around flags.
“The first one that went up was a smiley face and then at the end of October I changed it to one with poppies and soldiers that said ‘Lest We Forget’.
“Then I had the Union Jack and now I am flying Santa with his reindeer saying Merry Christmas.
“I think they make people happy to see them as they walk past.
“The kids going to school love them and some residents were looking forward to which one will go up next.”
Janis, who was in the RAF for three years in the 1970s before working as an administrator, said she planned to remove her flag later today (Wed).
“It is just Santa and his reindeer, I don’t understand how it is advertising.
“I am going to have to take it the Santa flag off because I can’t afford to pay a fine like that.
“I have got another 24 hours and I am going to go right down to the wire.
“I plan to speak to the council to ask them why it is classed as advertising but I am not sure what they can do.
“Apparently it is the law so I am not sure what I can do apart from try and get 100,000 signatures and go to Parliament to change it.
“I am allowed to fly my Union Jack flag so I might put that up but it is a shame I can’t fly the others.”
Friend Dawn Clarke bought the flagpole, which is around 13ft (4m) tall, and the 1.5m by 1m flags as a birthday present for Janis in June this year.
She said: “As long as I’ve known Janis she’s always said she wanted a flagpole so I thought I would get her one for her birthday.
“It’s quite upsetting that the council are threatening to fine her.
“I bought it online and it was only about £70. Then I saw the flags were about £15 each so I bought a few of those too.
“She’s taking it all in her stride but it is a bit of a worry for her. I’m not sure how the council have found out about it so I think it’s because one of the neighbours might not be happy with it.
“She went round and asked them if they minded and no one said they did. The letter they have sent her says it’s because of advertising.
“The only thing I can think of is the poppy flag that was flying. It’s a bit like what FIFA did but it’s not advertising is it really.”
The law states a flag can be flown on a pole as long as it is not higher than 15ft (4.6m) above the ground.
A spokeswoman for Broxtowe Borough Council said: “Flag poles require formal planning permission if they are above a certain height.
“Residents can receive free telephone advice about a flagpole prior to submitting a formal planning application.
“Once submitted, each application is judging on its own merits and the council will not pursue any enforcement action while an application is being considered.”