When running a business, finding efficient and tax-effective ways to reward your team can be a challenge. That’s where trivial benefits come in. These are of course different from allowable benefits, which follow a different set of rules and thresholds.
Introduced in April 2016, these small perks are exempt from tax and reporting, provided they meet specific criteria. Below, we’ve explained what trivial benefits are, how they work, and what rules apply, especially if you’re a director of a small or “close” company.
What is a trivial benefit?
A trivial benefit is a small perk or gift you can give to an employee without having to pay tax or National Insurance on it or report it to HMRC (as long as certain conditions are met).
To qualify, all of the following must apply:
- Cost: The benefit costs £50 or less (including VAT).
- Type: It isn’t cash or a cash voucher.
- Purpose: It isn’t a reward for work or performance.
- Contractual terms: It’s not provided as part of the employee’s contract or a salary sacrifice arrangement.
If even one of these conditions isn’t met, the benefit becomes taxable and must be reported via P11D, a PSA (Pay As You Earn Settlement Agreement), or through payroll.
What counts as a trivial benefit?
The key is that the benefit must be minor in nature, occasional, and not tied to job performance. Some common examples include:
- A celebratory gift (like a wine or a gift card under £50 at Christmas).
- Flowers to celebrate a work anniversary or other significant life milestone.
- A team meal out to celebrate a colleague’s birthday.
- A picnic or BBQ to build employee relationships.
As long as each benefit is £50 or under per employee and meets the other conditions, you can provide multiple trivial benefits across the year.
Special considerations for directors of close companies
If you’re a director (or an office holder) of a close company, which is a limited company run by five or fewer shareholders, there’s an added restriction. You (and your family/household members) can receive no more than £300 worth of trivial benefits in a tax year.
Go over that cap, and the excess becomes taxable. So if you’re using this exemption for yourself or other directors, keeping track of the total is important.
Trivial benefits and salary sacrifice
Trivial benefits do not qualify if they’re part of a salary sacrifice arrangement. In that case, the benefit becomes reportable and taxable, based on whichever is higher of:
- The salary the employee gave up
- The cost of providing the benefit
If your arrangement was in place before 6 April 2017, different rules may apply. Check with your accountant or HMRC.
Not sure it counts? Ask
The criteria for trivial benefits can seem straightforward, but if you’re ever unsure – especially if your benefit is unusual or borderline – it’s worth checking with HMRC’s employer helpline to avoid costly mistakes.
Related non-taxable benefits
Aside from trivial benefits, employers can offer a range of other non-taxable incentives to staff:
- Mileage reimbursements
Covering business travel in personal vehicles is tax-exempt so long as you stick to HMRC’s approved rates (45p per mile for the first 10,000 miles; 25p thereafter).
- Pension contributions
Payments you make into an employee’s registered pension scheme aren’t subject to tax or National Insurance.
- Annual health assessment
One complimentary health screening or check‑up each year can be provided tax‑free (note: any follow‑up treatment would be taxable).
- On‑site catering & refreshments
Meals supplied in a staff canteen (and light snacks or drinks in the workplace) are exempt from tax.
- Workplace parking
Providing parking spaces at or near the office doesn’t incur tax liabilities.
- Company mobile phones
Supplying each employee with one employer-owned mobile phone remains outside the tax net.
- Staff social events
Organising an annual work Christmas party or similar event is tax-free so long as the total cost per attendee does not exceed £150 (including VAT).
- Relocation allowances
You can cover moving costs up to £8,000 without creating a taxable benefit for the employee if it is wholly and solely business related.
- Business expense reimbursements
If employees incur costs wholly for business purposes, such as buying equipment for approved home working, and you reimburse them, these payments are not taxable.
Trivial benefits are a great way to recognise your team in a tax-efficient way, if used correctly. Stick to the £50 limit, ensure the benefit isn’t performance-based or contractual, and avoid cash or salary exchange. And if you’re a director of a close company, keep within the £300 annual cap.
