Giving the occasional gift to staff is a great way to keep them engaged and motivated. But how much can you give before they become taxed?
What is a trivial gift?
To be classed as 'trivial', the cost of each gift must not exceed £50 including VAT. If the cost of the gift is higher, the whole valuable is taxable and not just the excess. The rules are slightly different for directors and their employed family members- each gift can't exceed £50, but there's an annual cap of £300 in total.
Are there other restrictions on trivial gifts?
You can't use trivial gifts as rewards for performance or good work and they can't form part of a salary sacrifice agreement. Any gifts that you give your employees should be for things like weddings, Christmas, anniversaries or goodwill gestures. They also can't be cash or a cash voucher.
How do I report it to HMRC?
The simple answer is, as long as the gifts meet the criteria for being 'trivial', then gifts can be awarded free of NI and income tax without the need to notify HMRC. Check HMRC's own guidance here.
What records should I keep?
As with all other business expenses, trivial benefits should be recorded with the description, date, cost, who it was given to and why. It'd be a good idea to set up a separate code in your Chart of Accounts (if you're using software like Xero or Quickbooks) for trivial gifts and trivial expenses. You can read how to create an account in Xero's Chart of Accounts here. To make record-keeping easier, all of our clients use Dext to automatically upload, extract and record their invoices, bills and receipts.
Talk to us about gifts and rewards
Trivial gifts and employee rewards are two very different and distinct things. You can give trivial gifts up to a value of £50 to your employees without any tax consequences, but if you're looking to reward your employees or give bonuses or perks for specific good work, then you'll need to consider the tax implications of doing so. Book in a call to discuss your gifting and reward plans and the potential tax implications you could be faced with.