With Christmas just around the corner, you might be thinking about how you can spread some festive cheer among your employees.
Whether it’s a box of chocolates or a bottle of wine, small gifts at Christmastime can be a great way to boost staff morale, but popping to the shops and picking up presents for your team requires consideration as these purchases can have implications for your tax and National Insurance Contributions (NICs).
However, with an understanding of the rules surrounding trivial benefits, you can foster a positive work environment whilst ensuring your gifts are tax efficient.
What are trivial benefits in kind?
Trivial benefits are small, non-cash gifts or perks given to employees. For them to qualify as “trivial” in the eyes of HMRC, they must meet specific criteria:
- Each gift must cost £50 or less.
- The benefit cannot be cash or a cash equivalent (like gift cards exchangeable for cash).
- It must not be a reward for work or performance.
- The gift must not be part of an employee’s contractual benefits and cannot replace salary or bonuses.
Flowers, a theatre outing, or seasonal hampers are all examples of trivial benefits that might be given.
Tax liabilities of trivial gifting
One of the most significant advantages of trivial benefits is their tax efficiency. If these gifts meet the conditions set by HMRC, they are completely exempt from tax and NICs.
You will also not be required to report these qualifying gifts to HMRC, meaning there is no need to file a P11D form.
However, if a gift or benefit does not meet the criteria for trivial benefits, you must declare it to HMRC via the P11D process and pay any tax or NICs owed.
Note: The Chancellor’s Autumn 2024 Budget confirmed that payrolling benefits, and so reporting details of these in real-time, will become mandatory from April 2026, with P11D forms being phased out entirely. You can read more about this change here.
How to account for trivial benefits in your business
To maintain compliance, and to ensure you do not exceed the £50 limit, it is important to keep track of your trivial benefits; this includes documenting details like the date it was given, who it was given to, what the benefit was and the value of the benefit.
It can also be beneficial to create a separate expense category for trivial benefits in your accounting system.
This way, you can easily distinguish these gifts from other employee-related expenses and keep everything organised.
To incorporate tax-efficient gifting into your business strategy, please get in touch with our team.
