Tax-free trivial benefits

The tax exemption for trivial benefits allows employers to provide certain low-cost benefits (e.g., Christmas or birthday gifts) without tax or National Insurance liability.

Qualifying conditions – A benefit is ‘trivial’ if:

1.     1. It is not cash or a cash voucher.

2.     2. The cost is not more than £50.

3.     3. It is not given under a salary sacrifice arrangement or contractual entitlement.

4.     4. It is not provided in recognition of, or in anticipation of, work or services.

Close companies – For directors, officeholders, and their family/household members, the annual tax-free cap is £300.

Benefit cost – Normally the actual cost of providing the benefit. If given to multiple employees and individual costs are impractical to calculate, the cost is the total divided by the number of recipients.

Pitfalls:

• ·        Rewarding service – Gifts linked to work done (e.g., flowers for working late) do not qualify.

• ·        Salary sacrifice – Exemption cannot apply if exchanged for salary.

• ·        Contractual obligations – Both explicit and implied entitlements (e.g., cakes every Friday) are excluded.

• ·        Recurring benefits – If the annual value exceeds £50, the exemption does not apply (e.g., app with £40 monthly treatments = £480/year).