Tax-Free Christmas Gifts for Your Team

The holiday season’s a great time to thank your employees for their hard work. You can give tax-free Christmas gifts to you team by following the “trivial benefits” rules.

The Rules on Trivial Benefits

A gift to an employee is tax free as a trivial benefit if it meets these key conditions:

• It costs £50 or less per employee, including VAT.
• It is not cash or a cash voucher.
• It is not a reward for a specific service or under a salary sacrifice scheme.
• No Limit (Mostly): There’s no limit on the number of trivial benefits you can provide to staff in a year.
• Director’s Cap: Directors of ‘close’ companies face an annual £300 cap on the total value of trivial benefits they can receive.
• It’s provided on a special occasion, such as Christmas.

For example, a hamper, a bottle of wine, or a gift card for a retail store (not redeemable for cash) would all qualify as a trivial benefit, as long as the cost is £50 or less.

 

Why not give two?

This trivial benefit exemption means that it could be more beneficial to you to perhaps give more than one gift costing less than £50 each, instead of one gift that costs more than £50. For example, if you were to gift a turkey costing £45 and a bottle of wine costing £35, both gifts would fall within the trivial benefits exemptions (subject to the annual cap for close companies).

But if you were to gift a hamper costing £80, the benefit would be taxable in full, even though it costs the same as the two individual gifts.

 

The Christmas Party Exemption

Employers can also provide an annual Christmas party with a tax exemption of up to £150 per head. However, you need to be careful if you also give gifts at the party.

If the cost of a gift is included as part of the party’s per-head cost, it could push you over the £150 limit, making the entire amount taxable. This is especially true for gifts given to employees who don’t attend the party, as it suggests the gift isn’t part of the event itself. A simpler approach is to provide gifts of £50 or less separately, using the trivial benefits exemption.

MORE ON CHRISTMAS PARTY EXEMPTIONS

 

Expert Advice

Navigating tax rules can be complex. For a clearer understanding of how to show appreciation to your staff while remaining tax compliant, we can help. Contact us for advice on seasonal gifts, payroll, and other tax-related matters.

If you are still unsure about what you can give then please don’t leave it to chance. Our tax experts are ready to offer the clarity and guidance you need to ensure your Christmas gifting is both generous and tax-compliant.