The snowman outside Little Angel Theatre, in the cheery, dimly lit Georgian courtyard, does a good job of setting a festive scene before the show has even begun. Children touch it to see if it is real, and if its snowy credentials disappoint, the play which follows doesn't.

This charming children's show tells the story of Lara, a little girl whisked away on an Arctic adventure when she writes a letter to Father Christmas asking that Christmas be cancelled. It's Christmas Eve. Her mum is stressed out with the cooking and her little brother is being annoying. While the neighbours drink cocoa and hang wreaths on their front doors, at Lara's house festive spirit is running low and everyone's tetchy. They don't deserve a Christmas, she decides.

The domestic setting is nicely realistic. Lara's exasperated mum is heard off stage ("No Nigella, I haven't got any kumquats!"), and at this stage actors Clare Pointing and Michael Brett play the parts of the bickering siblings. When they are banished to their bedrooms they put model beds, complete with feet sticking out of the duvets, over their necks, so that just their over-large heads stick out of the covers. It's a typically inventive touch. Ruth Calkin completes the trio of actor puppeteers who share all the characters – moving seamlessly between playing human parts and working puppets, snapping between parts and accents.

As fantasy takes over, and Lara finds herself transported into the night sky, gliding on her letter to Father Christmas as it floats away on the wind, the actors switch to puppetering. Throughout, the interaction between puppets, actors and a layered set (all mauves and blues) of cut-out houses, mountains and icebergs, is a pleasure to watch. Visually, there is plenty here for very young children, and some of the most beautiful scenes involved changes of scale: as our heroine is whisked off on her letter, she becomes smaller and smaller, until a miniature version of the larger puppet drifts high up at the back of the stage. It's mesmerising, and it is a mark of Little Angel Theatre's handle on what holds children's imaginations that there is an enchanted silence in the auditorium at this point. They have a knack for drawing out a magical moment, and for interspersing the plottier sections (good for older children) with such picture book scenes.

There's lots to keep the adults entertained with too, even if some of the jokes speak a little too candidly to the theatre's Islington audience. Lara might be from Hemel Hempsted, but when Father Christmas offers to take her as far as Croydon, his "Only joking, ho ho ho" and the laughter of the audience make it clear which side of the river we are on. Father Christmas's elf advisor, Elfy, who speaks in Ali G-isms and calls Father Christmas "Papa C", is a bit embarrassing and a touch out of date, and a joke about his constant misuse of the word "literally" wears a bit thin. That said, Santa's Christmas-themed swearing ("Oh sugar plums! Oh shiny balls!") is a nice touch, as is his "sounding the depths of his sorrows" by singing – huskily and accompanying himself on a puppet guitar – a "Night Before Christmas Blues". 

The songs by Ben Glasstone (co-writer with Tim Kane) are a real highlight. The play is framed by renditions of the traditional "The Night Before Christmas" (when "not a creature was stirring, not even a mouse") but sitting happily alongside this well-known verse are lyrics such as "here at number 22 we've got nothing to look forward to. All we're going to do is fight." The songs pepper the piece with quirky asides: Lara's drama-queen stocking, worried that she is not going to be filled tonight after spending a whole year in a drawer, sings about feeling "so empty", and the reindeer, marooned at the South Pole after a navigational disaster, console themselves with songs about "me time".

As the show brings the cast of Christmas alive, it strikes a well-judged balance of traditional sugar-plum magic, a modern setting and lots for the adults to giggle at. The excellently voiced puppets move with the graceful lightness of characters in an animation, but a somewhat jaded Father Christmas, and reindeer who grumble (Dancer wears leg-warmers and accuses Santa of not understanding "the transformative power of dance"), ensure there is nothing Disneyish about this fairytale. 

The Night Before Christmas, at Little Angel Theatre

A lively mix of characterful puppets and traditional festive spirit. This musical children's show brings the old rhyme to life with kids who argue and a Father Christmas who's not always so jolly. At the Little Angel Theatre.