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How to Give Your Employees a Tax Free Christmas Gift

If you know the HMRC rules and stick to them there is no reason you can’t give your Employees a Tax Free Christmas Gift. After all it is the ideal time to thank you employees for all their hard work in the year.

So before you start ordering here’s what you need to know about HMRC little tax trick known as Trivial Benefits.

Tax Free Christmas Gifts to Employees

HMRC does allow employers to give small gifts to their employees tax free.  Which is ideal when it comes to Christmas Time.

These small tax free gifts are classified as ‘Trivial Benefits‘.  In order to meet the criteria to be considered a Trivial Benefit, the gift must:

  • cost £50 or less to provide;
  • not be a cash or a cash voucher;
  • must not be a reward for their work or performance;
  • not part of the terms of their contract.

So if you are thinking about giving your employees a Christmas Gift of a bottle of wine or box of chocolates for example, HMRC will not seek to tax these small gifts.

How Tax Works on Christmas Gifts to Employees

If you do not meet the criteria above for your gift to be considered a Trivial Benefit, then the Christmas Gift given to your employees will become a Taxable Benefit.

Taxable benefits need to be P11d as a Benefit in Kind. A P11d if a form that is submitted once a year declaring any benefits employees have received.  Once submitted an employee must pay tax on the cash value of the benefit and the employer pays Employers National Insurance.

Read the Complete Guide to P11d Here.

Christmas Cash Gifts to Employees

The administrative burden of giving gifts that are not considered a Trivial Benefit can be really onerous for a one off, small-ish Christmas gift.

Often the simplest solution for employers is to give a cash gift which is added to payroll salaries in the month of December and let it be taxed along side normal salary payment.

Next: How to Throw a Tax Free Christmas Party

Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - a UK small business finance blog where she shares help and advice with the self-employed community to make topics like registering a business, bookkeeping and taxes easy to understand.