Tax-free trivial benefits
There is no tax to pay on trivial benefits in kind (BiK) provided to employees where all of the following apply:
- the benefit is not cash or a cash-voucher; and
- costs £50 or less; and
- is not provided as part of a salary sacrifice or other contractual arrangement; and
- is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.
The tax-free exemption would apply to small non-cash benefits like a bottle of wine or a bouquet of flowers given occasionally to employees or any other BiK classed as 'trivial' that falls within the exemption.
The rules provide an excellent opportunity to give small rewards and incentives to employees without any further tax implications. The main caveat being that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.
The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1 National Insurance contributions. However, trivial benefits provided as part of a salary sacrifice arrangement are not exempt.
Planning note for directors
The rules also allow directors or other office-holders of close companies and their families to benefit from these allowances, but with an annual cap of £300. The £50 limit remains for each gift. The £300 cap doesn’t apply to employees. If the £50 limit is exceeded for any gift, the value of the benefit will be taxable.