Tax on trivial benefits
You don’t have to pay tax on a benefit for your employee if all of the following apply:
- 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
This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HMRC know.
You have to pay tax on any benefits that don’t meet all these criteria.
KEEN to reward staff with bonuses this Christmas, but concerned about tax and NI implications? Don’t worry, goodwill needn’t be taxing!
Government rules allow tax-exempt awards of £50 or less – but not many people know that, and only around one in ten companies take it up.
A survey of 1,500 UK workers and business leaders by One4all Rewards – which specialises in multi-store gift cards – has found that the majority are unaware of HMRC’s Trivial Benefits Allowance.
This is despite the fact that 83% of British bosses would like to give regular rewards to their employees to boost morale, motivation and loyalty.
More than half (53%) of British business leaders said that they do not currently give their employees non-performance related benefits because the business does not have enough budget and cannot afford them.
In April 2016, HMRC made changes to workplace benefits rules to allow businesses to benefit from the exemption – reducing tax and National Insurance Contributions charges. However, only 10% of businesses are currently making use of the tax exemption on trivial benefits.
Despite the relatively small sums involved, the survey showed that receiving this kind of benefit would improve workers’ morale (48%), make them feel more loyal to the company (35%) and even motivate them to work harder (31%).
Almost half (47%) of UK workers said that they would most appreciate a bonus or reward at Christmas, 32% would like to receive a bonus after a busy period at work and 26% would like a bonus on their birthday.
And 62% of workers said rewards in the form of a gift voucher or card which allows them to choose their own reward, would have the biggest impact on their attitude towards work.
Alan Smith, UK managing director of One4all Rewards, said: “There is lots of potential for British businesses to offer non-performance related benefits to their staff under the latest HMRC changes to the workplace benefits rule.
“As Christmas was highlighted as the top season workers would like to receive a benefit, now is the perfect time for business leaders to consider making the most of the tax exemptions on non-performance related trivial benefits.”
