Tax Questions: Tax Free Christmas Gifts

This is a timely reminder that employers may make small tax-free gifts to employees and directors if the cost to 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 and 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 be say a turkey, hamper or bottle of wine. Many employers provide vouchers from retailers like Marks and Spencer or John Lewis so staff can choose their own gifts. These are non-cash vouchers and would fit within the exemption. If the cost to 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.

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