Tax Free Christmas Gifts for Employees

Christmas is on the way and it is the ideal time to thank you employees for all their hard work in the year. Giving your employees a Christmas treat may be taxable so before you start ordering, here is what you should know.

Tax Free Christmas Gifts to Employees

HMRC does allow employers to give small gifts to their employees tax free.  This is what is known as ‘Trivial Benefits’.  This is the criteria for a gift to be tax free and classified as a Trivial Benefit:

  • it cost you £50 or less to provide
  • it isn’t cash or a cash voucher
  • it isn’t a reward for their work or performance
  • it isn’t in the terms of their contract

So if you are thinking about giving your employees a 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 and need to be declared on a P11d as a Benefit in Kind.

What is a P11D Form?

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.

HMRC Christmas Party Allowance

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.