Making employees feel valued is critical for their morale, engagement, and overall well-being.
Often, it’s the smaller gestures that have the most significant impact on employees’ perceptions of their work environment and employers.
What are trivial benefits in kind?
The term ‘trivial benefits in kind’ refers to minor gifts that employers can offer staff as a token of appreciation. Examples include chocolates, wine, gift vouchers, theatre tickets, team lunches or dinners.
Under UK tax law, trivial benefits provided by an employer are exempt from income tax and National Insurance Contributions.
This means neither the employee nor the employer have to pay tax or National Insurance on these benefits, if certain conditions are met. You can also reclaim VAT on trivial benefits if they meet eligibility criteria.
Eligibility criteria
To be considered a trivial benefit, the gift must:
- Cost £50 or less
- Not be given in cash
- Not be a reward for work or performance
- Not be included in the employee’s contract
Is there a tax-free gift limit?
Beyond the £50 per employee limit, there’s no annual limit on total trivial gifts provided to an individual employee in a tax year. However, it is important to note that if a trivial benefit exceeds £50, the full amount is taxable, not just the excess over £50.
An exception exists for “close” companies, (family businesses controlled by five or fewer people). If the recipient is a director, office holder, or a family member, the exemption limit is £300 per tax year.
Parties and events
It is important to note that costs related to staff parties are mostly tax-free if the event is open to all staff.
There is an annual limit of £150 (including VAT) per person for these events. Spending even slightly over this makes the total cost of the party or event taxable.
Tax benefits
Trivial benefits are exempt from tax, National Insurance, and HMRC reporting, making them a cost-effective way to show appreciation.
However, trivial benefits provided under salary sacrifice don’t receive a tax exemption.
If a gift is made this way, tax and National Insurance must be paid, and the difference between the trivial benefit and the salary sacrifice reported via the individual’s P11D form.
Ready to make the most of trivial benefits in kind?
Trivial benefits in kind are strategic investments in your employees and, by extension, your business.
They offer advantages ranging from improved morale and engagement to tax benefits. If you haven’t considered implementing them yet, now is a great time to start.
For more details or personalised advice on how trivial benefits in kind can benefit your organisation, please contact us today.
