Giving occasional gifts to your staff is a great way to keep them engaged and motivated. But how much can you give before these gifts become taxable?
Certain lower-value gifts can be given to employees (including directors) tax free. These have to be classed as 'trivial gifts' to qualify. But what counts as 'trivial' in these circumstances?
What is a trivial gift?
To be treated as 'trivial', the cost of each gift mustn't exceed £50. If the cost is higher, the whole value is taxable, not just the excess. The limit is per gift but, in addition, for directors and their (employed) family members, there's an annual cap of £300 in total.
Are there any other restrictions?
The award can't be part of a salary sacrifice agreement, or a reward for work that one of your employees has performed. Any gifts you give should be for things like weddings, anniversaries and Christmas, or as general goodwill gestures.
How do I report it to HMRC?
You don't. As long as the gift meets the criteria, eligible gifts can be awarded free of National Insurance and income tax, without any need to notify HM Revenue & Customs (HMRC).
What records should I keep?
There's nothing specifically mandated when it comes to recordkeeping. But, as a minimum, you should keep a record of each gift, with the date, description, cost, who it was given to and why. That will ensure you're prepared in the event of any queries being raised.
Talk to us about gifts and rewards
Trivial gifts and employee rewards are two very different and distinct things. As we've highlighted, you can give gifts up to a value of £50 to your employees without any tax consequences. But if you're looking to give out rewards, bonuses or perks for specific good work then you'll need to consider the tax implications of these plans.
Have a chat with us to discuss your gifting and reward plans and the potential tax outcomes you could come up against.