What can I do to help my employees as they tighten their belts?

08 Aug 2022

By Andrew Hague, Partner

Giving gifts to your employees can be a great way to increase engagement and raise the overall morale of your team, especially as we all feel the effects of rising costs. But how much can you give before there are tax implications?

The good news is that you can give gifts that don’t exceed £50 in value to your employees without any tax or National Insurance (NI) charges arising – as long as you follow HMRC’s rules. The company’s cost is also tax-deductible, saving corporation tax.

Can I give tax-free gifts to my employees?

As part of HM Revenue & Customs’ (HMRC’s) Trivial Benefits scheme, you can give gifts to your employees to mark birthdays, weddings or just ‘because’, all without attracting any tax charges. Company directors can also benefit from the same Trivial Benefits scheme.

  • Trivial benefits can be provided to employees without any adverse tax or NI implications.

  • To qualify, gifts can’t be a reward for services, can’t be cash or a cash voucher, can’t be contractual, and the cost mustn’t exceed £50 per gift.

  • For directors the total gifted can’t exceed £300 in any year. Although gifts are not limited for other employees if it was a regular gift then it’s likely to be treated as a reward for services – which would then have tax implications.

  • If over the course of a year, a director awarded themselves 6 x £50 gift cards (maxing out the £300 cap) as a higher-rate taxpayer they could save around £130 in tax and NI compared with a £300 salary. The company would also save about £45 in NI.

  • Gift cards are fine as long as they aren’t pre-loaded debit cards that can be used to withdraw cash –you can’t give cash as a gift.

How does the Trivial Benefits scheme work?

If an employee is given a bottle of wine for hitting a sales target, that would be taxable. If they were given the wine because it’s their birthday, as long as it was below £50 it would be within the exemption. It could also be given just because you’re in a good mood and feeling generous – it just can’t be anything related to the company or individual performance.

Talk to us about meeting the rules around employee gifts

It’s essential that you stick to HMRC’s rules around employee gifts and don’t end up unintentionally creating a negative tax impact for people on your team, or for the business.

If you want to discuss this further we can help by providing guidance. Give us a call.

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