The last 18 months have been tough for all businesses, especially small ones. Employees have stepped up to the mark and really proved their worth, adapting to working from home and proving they can still work efficiently, and as a result gifts for employees may be an even bigger consideration for your business.
As an employer you may want to reward your staff by buying gifts or treating them to make them feel appreciated, but did you know that this might have implications on your tax? The government has some strict rules in place when it comes to trivial benefits in the workplace, so it is worth knowing what you can and cannot do without having to declare it to HMRC.
Gifts for employees without tax consequences
If you’re contemplating buying gifts for employees to thank them, here are some one-off purchases you can make that won’t impact your National Insurance or incur any further tax, as long as it meets the government’s trivial benefits criteria:
- It costs less than £50
- It is not a cash or cash voucher benefit
- It does not relate to their work or performance
- It is not part of their contract terms.
The total amount that can be gifted, whether it is a director of the company or employee, is capped at £300 per year.
You will need to pay tax if you accidentally go over that cap or fail to meet the above requirements. If you do, then you will be taxed via a P11D form and may also be liable for Class 1A National Insurance.
Alternatively, you could cover these costs in a Pay As You Earn Settlement Agreement (PSA), where the employer agrees to settle the liability.
Examples of trivial benefits for employees
Below are some great ways to say thank you to your employees or celebrate an event or milestone that are classed as trivial benefits and do not incur tax:
- Taking staff out for a meal to celebrate a birthday or other key milestone
- Buying Christmas presents for employees
- Sending flowers when a member of staff has had a baby
- A party where every employee is invited.
If the gift goes over the £50 cap, however, it will all be taxable, not just on the excess amount.
Taxable gifts for employees
The following are not categorised as trivial benefits and will have tax implications:
- A working lunch that is classed as part of the employee’s contract
- Paying for events, gifts or incentives that reward an employee for their performance
- Paying for events, gifts or incentives that relate to employment, such as team building events
- Paying for transport when a member of staff has to work late
We can help
If you are looking for tax advice for your business, head here, e-mail hello@itsrelative.co.uk or call the team on 01484 441431.