Rewarding your team. New Year, New Tax Breaks

By Anne Beashel – Senior Tax Manager.

HMRC have made things easier, which is a welcome change.

Previously, rewarding your employees for a birthday or wedding could have tricky tax consequences, involving reporting benefits on P11D’s or the company arranging Payment Settlement Agreements with HMRC.

The new rules on trivial benefits have made some welcome changes to allow employers to treat their employees, which can sometimes avoid the need for a PSA.

So how does it work?  If the benefit qualifies as a trivial benefit, under HMRC’s new rules it will be exempt from income tax and NICs.

The exemption will only apply if:

  • the cost does not exceed £50 inclusive of VAT (or £50 per person if a benefit is provided to several employees at once);
  • the benefit does not consist of cash or a credit token;
  • no salary sacrifice is involved, and
  • provision of the benefit is not linked to any particular services provided by the employee.

There is an annual cap of £300 on the cost of tax and NIC-free trivial benefits provided to office holders of close companies, and to their families.

This new exemption is a great way to treat employees and can be used at Christmas, birthdays, weddings etc. as long as the gift falls within the above conditions to qualify for exemption.

Care must be taken though, in order to comply with the new rules, as if you exceed the £50 limit the entire cost will become taxable to PAYE and NI.  The gift must not be linked to work or performance, rather it should be given as a goodwill gesture.  The benefit must not be part of a salary sacrifice arrangement.

The HMRC website gives examples of various benefits and whether they qualify as trivial or the reasons why they do not.

This is a great way to treat employees tax free.  It also allows directors, or their families to receive benefits tax free up to £300 per year. For more information or to talk through the new rules get in touch with our team of experts on 0800 0776410.


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