In a working environment, small acts of recognition can significantly influence how staff view their workplace and their employers, often resulting in increased employee morale and productivity.
Trivial benefits in kind are such acts that can be given out to employees. They are small, non-monetary tokens of appreciation and can range from small gifts like chocolates and wine to gift vouchers, theatre tickets, or group meals.
Trivial benefits are not subject to Income Tax and National Insurance Contributions (NICs).
This exemption means that neither the employee nor the employer is required to pay tax or National Insurance for these benefits, provided they meet certain criteria.
Additionally, you can reclaim the VAT on these benefits if they are eligible.
Criteria for eligibility
For a gift to qualify as a trivial benefit, it must:
Is there a limit on tax-free gifts?
While there is a £50 limit per employee for each trivial benefit, there is no yearly cap on the number of such gifts for an individual employee.
However, for companies like family-run businesses with five or fewer controllers, the exemption limit for directors, office holders, or their family members is £300 per tax year.
Staff parties and events
Note that expenses for staff parties are generally tax-free if the event is open to all employees. The yearly limit here is £150 (including VAT) per person.
Exceeding this limit even slightly results in all costs from the party or event becoming taxable benefits.
Tax advantages
Trivial benefits are free from tax, National Insurance, and HMRC reporting requirements, offering a cost-effective way to show your appreciation.
However, trivial benefits provided under a salary sacrifice arrangement do not qualify for tax exemption.
In such cases, tax and National Insurance are due on these expenses, and the difference between the trivial benefit and the salary sacrifice must be reported on the individual’s P11D form.
Making the most of trivial benefits in kind
Trivial benefits in kind are smart investments in your workforce and, consequently, your business. They bring benefits from enhanced morale and engagement to tax advantages.
If you haven’t yet considered using them, now is an excellent time to explore their potential.
For further information or tailored advice on how trivial benefits in kind can aid your business, please do not hesitate to get in touch with us.
