Making sure gifts to employees are tax-free

Some employers may wish to give a small gift to their employees, good on them! As long as the employer meets the relevant conditions, your employee won’t incur tax.

A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee ‘benefit in kind’.

In order for the benefit to be exempt it must satisfy the following conditions:

  • the cost of providing the benefit does not exceed £50 per employee (or on average when gifts are made to multiple employees)
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of a contractual arrangement (including salary sacrifice)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
  • where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions, so check before you gift!

No more than £50 

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50!

The cost of providing the benefit to each employee, and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. HMRC examples consider various gifts including turkeys, bottles of wine and gift vouchers, you can check out the list for gift ideas!

We absolutely want you to be kind to your employees, so give gifts willingly! But do make sure they won’t be stung on their tax bill after. Get in touch to discuss before you buy.

Back to main News & events page
If you have any further questions, or would like to book a free
one-hour consultation with one of our partners, please get in touch.
Get in touch now