A Festive Take on Trivial Benefits: Tips for Directors
Are you also concerned about the tax on Christmas gifts? Thanks to the HMRC trivial benefit allowance, Christmas got more exciting without worries of tax and National Insurance Implications. It is the best time for directors of limited companies to treat their teams with tax-free perks.
This guide has detailed how to make the most of these trivial benefits.
Trivial Benefit? What Exactly Does this Allowance Mean?
Trivial Benefits are tax-free perks with specific criteria that businesses provide to employees. They are the best way to increase the festive spirit in the business expenses while sticking to HMRC’s rules.
What are the Rules For Trivial Benefits?
Your gifts and perks must meet the following criteria to qualify as a trivial benefit.
The cost of the gifts must not exceed £50, including VAT. If your gift costs even a penny above £50, then be ready to pay the tax.
It is better to avoid cash or cash vouchers. You can use gift cards, but they are not exchangeable for cash.
Example
Trivial Benefits examples are as follows
- It is best to give a £50 Amazon gift card rather than a cash voucher, which is available in cash.
- The gift must be a perk, not a reward. Also, these trivial gifts are not tied to employee work performance or given as bonuses. Instead, giving your employee this gift as a token of appreciation won’t qualify as trivial.
- Directors are capped at £300 per year. That means directors of closed companies (closed by five or fewer shareholders should have an annual cup of £300).
- So you can enjoy an annual tax-free benefit of six £50 benefits. There is no yearly cap for regular employees.
Trivial Benefits in Practical
Trivial gifts offer flexibility, whether fancy gifts, chocolate boxes, or wine bottles. They are the best way to complement your employees’ holidays, show appreciation to your team, or show yourself as a director within the rules.
What is the recording process of Trivial Benefits in Accounts?
So, when it comes to recording benefits, add them as Trivial Benefits or mention them as Staff Welfare. If using this allowance is usual, consider tracking your spending to ensure you don’t hit the cap.
Trivial Benefits – Examples
Trivial benefits include the following.
- A festive gift card for a local restaurant
- A prosecco bottle for Christmas celebration
- Gifting a flower bouquet.
Your gift will be completely tax-free when it fits the £50 limit and meets the above criteria.
Plan Your Treats for the Festival
So, keeping the cap and rules in mind, what would you prefer to stay within the £50 limit? A basket of the best chocolates or a bouquet? These benefits are the best way to add spark to the festive season in a tax-efficient manner.
If you want to know more about trivial benefits or tax-free perks, we are here to provide beneficial advice and knowledge on your queries.
Enjoy Happy Holiday Gifts!