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Tax Free Christmas Gifts to Staff

‘Tis the season of giving, so here’s 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 & 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.

Staff Christmas Parties

For the last couple of years during the Covid-19 pandemic many businesses put on ‘virtual’ Christmas parties for their employees and HMRC agreed that would be acceptable and that the exemption from tax would continue to apply. 

There continues to be no taxable benefit for employees provided that all staff are invited, and the cost does not exceed £150 a head, inclusive of VAT.

The £150 per head limit applies to a tax year, so if you have also had an annual summer event then provided the combined cost of the two events is no more than £150 a head there would be no taxable benefit in kind. If however the summer event cost £80 a head and the Christmas party £100 a head only one event would qualify for the exemption.

If you would like any more help or advice on gifts to staff, please do not hesitate to contact us on 01384 376964.

Folkes Worton LLP Chartered Accountants
Accounting for the Future

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Matthew Morris FCCA CTA
Tax Partner
Dan Simpson ACA
Chartered Accountant
Ellie Smith ATT
Tax
Jack Taylor
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