Trivial benefits – how to provide tax-free gifts to your employees

Trivial benefits are small perks provided by employers to employees that are exempt from tax and NI, provided certain conditions are met.

These benefits are designed to allow employers to provide modest, tax-free rewards without the administrative burden of reporting them to HMRC.

Here we explain how Trivial Benefits work in practice.

Conditions for Trivial Benefits Exemption

For a benefit to qualify as ‘trivial’, it must satisfy all the following criteria (see EIM21864 for full details):

1. Value: The value of the benefit does not exceed £50 (including VAT) per employee. If the benefit has been provided to a group of employees and it’s not practicable to work out the exact costs, you can use the average cost per employee.
2. Form: The benefit is not given in the form of cash or a cash voucher. Non-cash vouchers (e.g., store gift cards) are allowed, provided they are not exchangeable for cash.
3. Purpose: The benefit is not provided as part of any contractual obligation or in recognition of services performed as part of the employee’s duties. Trivial benefits must not be written into your employment contracts
4. Frequency: The number of trivial benefits an employee can receive in a tax year is not limited, except for directors of close companies.
5. Can’t be used for salary sacrifice: If you provide trivial benefits as part of a salary sacrifice arrangement, they won’t be exempt.

If any of these conditions are not satisfied, the benefit is taxed normally and subject to any other exemptions or allowable deductions.

Additional rules for directors of close companies

A ‘close’ company is typically a limited company controlled by five or fewer shareholders.

For directors or office holders of such companies (including members of their families or households), there is an annual cap of £300 on the total value of exempt trivial benefits.

Some examples of trivial benefits

• Taking employees out for a meal to celebrate a birthday.
• Providing each employee with a Christmas present.
• Giving flowers on the birth of a new baby.

It’s important to note that if the cost of the benefit exceeds £50, the entire amount becomes taxable, not just the excess over £50.

Available to all types of business

• Limited companies: Can provide trivial benefits to employees and directors, as long as they adhere to the £50 per benefit limit and the £300 annual cap for directors of close companies (see above).
• Sole traders and partnerships: While they can offer trivial benefits to their employees under the same £50 per benefit rule, sole traders and partners cannot receive tax-free trivial benefits themselves.

What are the tax and reporting implications?

Trivial benefits that meet the specified conditions are exempt from:

• Income Tax
• National Insurance contributions (NICs)

Additionally, there is no requirement to report these benefits on forms P11D or P11D(b).

What about VAT?

If your business is VAT-registered, you can reclaim VAT on trivial benefits provided to employees. The benefits must be for business purposes and meet the usual VAT recovery rules. Importantly, the £50 limit must include the VAT element.

Keeping accurate records

While there’s no formal reporting requirement for trivial benefits, it’s sensible to maintain records detailing:

• The nature of each benefit provided
• The associated costs
• The recipients

Using accounting software like FreeAgent and Xero simplifies record-keeping and ensures you can provide clear, accurate information in the unlikely event of an HMRC enquiry.

Further reading

• For comprehensive guidance, read HMRC’s official advice on trivial benefits.
• Some examples of how trivial benefits apply – EIM21868
• Conditions to be satisfied for trivial benefits to be tax-free – EIM21864
• Find out more about the £150 per head annual party exemption (for limited companies only).