What if you could provide gifts to your employees without having to pay tax or National Insurance (NI) contributions on them? HMRC has laid out specific conditions under which you can do just that with what are known as “trivial benefits.”

This article will explain what trivial benefits are, the conditions they must meet and any restrictions on trivial benefits for directors, employers and employees.

What Are Trivial Benefits?

A trivial benefit is a gift or perk you provide to an employee. Such benefits are tax-free if they meet the trivial benefits rules outlined by HMRC. The aim of these benefits is to provide employers the opportunity to present employees with small tokens of appreciation without the tax and associated admin burden.

Requirements for Trivial Benefits Exemption

The trivial benefits rules state that for a benefit to qualify, it:

1. Must cost £50 or less per employee per benefit (including VAT)
2. Must not be cash or any form of cash-exchangeable voucher
3. Must not be a reward for an employee’s work or performance (such as with bonuses)
4. Must not be part of an employee’s contract
5. Must not be part of any salary sacrifice arrangement

If all these conditions are met, the benefit qualifies as a trivial benefit and remains tax-free.

Tax on Trivial Benefits

Provided a benefit qualifies as a “trivial benefit” it is totally tax-free. This means:

• You do not have to pay tax on benefit
• You do not have to make NI contributions on the benefit
• You do not have to let HMRC know about the benefit.

What If a Benefit Exceeds the £50 Threshold?

If a benefit costs more than £50, it is no longer a “trivial benefit” and the full amount is taxable, not just the excess above £50. In such a case, you must report the entire benefit on a P11D form and you may have to pay National Insurance on the benefit. You can learn more about tax on trivial benefits here.

Examples of Trivial Benefits

Provided it meets the conditions above, a trivial benefit can be almost anything. Examples of trivial benefits include:

• Team meals such as pizza lunches, coffee & cake outings, Easter brunches or Christmas parties.
• Gift cards which cannot be exchanged for cash such as Amazon, Spotify or Google Play gift cards.
• Event tickets such as those for theatre, comedy clubs, concerts or sport events.
• Birthday gifts such as chocolates, flowers, books or wine.
• Seasonal gifts such as Christmas hampers.

Trivial Benefits Annual Limit

The total value of trivial benefits that can be provided each year depends on whether the recipient is a regular employee or a director of a close company.

Limits on Trivial Benefits for Employees

For regular employees, provided each benefit meets the rules, there is no cap on how many trivial benefits in a year each employee can receive. This means employers can provide employees with as many trivial benefits as they wish without triggering tax or NI liabilities.

Limits on Trivial Benefits for Directors

For a director of a close company, the combined value of trivial benefits they can receive within a tax year is limited to £300. A "close company" is one which is controlled by 5 or fewer shareholders. This capped trivial benefits allowance only affects directors and office holders.

Tracking Trivial Benefits

While you don’t need to report trivial benefits to HMRC, it’s still good practice to keep records of them, especially where multiple benefits have been issued. This will help you ensure the benefits are compliant and avoid disputes that might occur with HMRC.

Last Word

Trivial benefits present a great opportunity for you to provide tax-free perks to your team. These tokens of appreciation can go a long way in raising morale and creating a positive work environment. That said, to keep them exempt from tax and NI, it’s essential you ensure they meet all the conditions of “trivial benefits.” Don’t exceed the annual £300 trivial benefits allowance for directors of close companies and maintain records of all trivial benefits for compliance purposes.

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