Trivial Benefits at Christmas

As the holiday season comes to an end, many businesses reflect on how they showed appreciation to their employees without creating an unexpected tax burden. One useful tool available to employers is the statutory trivial benefits exemption – a tax-efficient way to provide small gifts at Christmas and throughout the year. At Cheylesmore Accountants, we help businesses understand the rules around this and how to apply them correctly, whether it’s declaring this in a Self-Assessment tax return or managing payroll reporting.

What Is a Trivial Benefit?  
A trivial benefit is a non-cash benefit provided to an employee that is exempt from Income Tax and National Insurance contributions. It is not required to be reported to HMRC provided it meets the following criteria:

• The cost to the employer of the benefit is £50 or less per employee, including VAT

• It is not cash or a voucher that can be exchanged for cash

• It is not provided in recognition of services performed

How the £50 Limit Works
For employers, the £50 limit applies to each individual benefit per employee, not the total cost across the workforce. This means you can provide multiple trivial benefits throughout the year, as long as each one meets the conditions above.

Special Rules for Directors of Close Companies
Additional restrictions apply for directors of close companies and their family members. Directors may receive trivial benefits exempt from tax up to a total of £300 per tax year. Any amount exceeding this cap must be reported as a taxable benefit.

Trivial Benefits vs Other Exemptions  
It is important to distinguish trivial benefits from other employment tax exemptions:

• Annual staff party exemption: Separate from the trivial benefits rule, this allows up to £150 per employee for a largely social event once a year without tax implications.

• Payrolling benefits: From April 2026, HMRC will require most benefits in kind to be reported via payroll rather than P11D forms.

Having an accountant ensures all benefits, trivial or taxable are reported correctly and accurately based on your business and tax commitments.

Common Pitfalls
Trivial benefits help build team morale and staff retention; however, mistakes can quickly turn into taxable liabilities for your business or your employees. Avoid this by:

• Sticking to the £50 limit-even a penny over will disqualify the exemption, HMRC doesn’t allow a buffer.

• It is a gift and not a reward based on work or performance

• Avoid cash or cash vouchers

• Making sure the gift is not part of the employee’s contract

• Keep accurate records, appoint an accountant to ensure compliance

Why This Is Important for Your Business
Using trivial benefits correctly can save your company and employees from unnecessary tax and administrative burden at Christmas and year-round. Correctly applied, these rules mean:

• No requirement to report qualifying gifts to HMRC

• No Income Tax or NICs for the employee or employer

• Simplified compliance during year-end Self-Assessment and payroll reporting

As expert accountants in Coventry, we regularly advise businesses across the country on structuring seasonal gifting and preparing any necessary HMRC filings prior to any deadline. This helps your business avoid unexpected tax liabilities whilst maintaining strong employee relationships.

If you’re unsure whether your planned holiday gifts qualify as trivial benefits or how they should be treated within your business, contact Cheylesmore Accountants and plan ahead.