Tax Free Christmas Gifts to Staff

This is a timely reminder that employers may make small tax-free gifts to employees and directors if all of the following conditions apply:

• The cost to the employer is £50 or less

• It is not cash or a cash voucher

• It is not a reward for their work or performance

• There is no contractual entitlement

• It is not provided as part of a salary sacrifice arrangement

This is known as the ‘trivial benefit’ exemption. Employers do not need to pay tax or National Insurance or let HMRC know, however, they need to keep a record of the gifts should HMRC request the details.

The gift could, for example, be a Christmas Turkey, hamper or a few bottles of wine. Many employers provide vouchers from retailers such as Marks and Spencer or John Lewis so that their staff can choose their own gifts. These are regarded as non-cash vouchers and would fit within the exemption. If the cost to the employer exceeds £50 then the whole amount is taxable.

Note that directors of ‘close’ companies can’t receive trivial benefits worth more than £300 in total per tax year. A ‘close’ company is a limited company that, broadly, is run by 5 or fewer shareholders or any number of directors.