Trivial benefits are small gifts or perks an employer gives to an employee. They offer a simple and effective way to reward employees.
To qualify as a trivial benefit, it must meet all of the following conditions:
- It costs £50 or less (including VAT)
- It is not cash or a cash voucher
- It is not a reward for work or performance
- It is not included in the employee’s contract
If the benefit fails just one rule, it becomes fully taxable. The full value then becomes subject to Income Tax and National Insurance. Employers cannot simply tax the amount above £50.
Qualifying Trivial Benefits
Many everyday gestures qualify as trivial benefits when they meet the rules.
Common examples include:
- Taking employees out for a birthday meal
- Giving Christmas hampers or a bottle of wine
- Providing tickets to concerts or sporting events
- Sending flowers to celebrate a new baby
Employers may also offer seasonal gifts or gestures of goodwill. However, they must ensure the benefit remains a genuine gift rather than a reward.
In group situations, employers can calculate the average cost per employee. This helps confirm that the value stays within the £50 limit.
Limiting Trivial Benefits
For most employees, no annual limit applies. Employers can provide multiple trivial benefits throughout the year. However, each benefit must meet the qualifying conditions on its own.
Directors of close companies face additional restrictions. A close company usually has five or fewer shareholders who often run the business. Directors can receive up to £300 in trivial benefits each tax year.
This cap applies strictly and requires careful monitoring:
- The £300 limit applies per director
- It includes benefits provided to family or household members
- Family members include spouses, partners and children
- Any amount above £300 becomes taxable
Non-Qualifying Benefits
Some benefits do not qualify, even if they appear small in value. Employers must recognise these exclusions to avoid errors.
Non-qualifying benefits include:
- Cash payments or cash vouchers
- Rewards linked to performance or targets
- Benefits included in employment contracts
- Work-related expenses (such as late-night taxis)
- Team-building events linked to work duties
These benefits fall outside the exemption rules. As a result, employers must report them and apply the appropriate tax treatment.
Tax Treatment of Trivial Benefits
When a benefit meets all conditions, it remains fully exempt from tax.
Consequently, employers do not need to:
- Report it to HMRC
- Pay Income Tax
- Pay National Insurance Contributions
This makes trivial benefits an attractive option for many businesses. However, employers must review each benefit carefully.
If a benefit does not qualify, different rules apply:
- Benefits costing more than £50 become taxable
- Gifts linked to performance become taxable
- Contractual benefits become taxable
In these cases, employers must report the benefit and apply the correct tax and National Insurance treatment.
The Problem with Salary Sacrifice
Trivial benefits do not qualify for exemption under salary sacrifice arrangements. This has been the rule since April 2017.
A salary sacrifice arrangement involves an employee giving up part of their salary in exchange for a benefit. However, this arrangement changes the tax treatment.
If a benefit forms part of salary sacrifice, it becomes taxable. Employers must report the higher of the salary given up or the cost of the benefit. They must also include this amount on a P11D.
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This article is for general informational purposes only and does not constitute legal or financial advice. While we aim to keep our content up to date and accurate, UK tax laws and regulations are subject to change. Please speak to an accountant or tax professional for advice tailored to your individual circumstances. Pi Accountancy accepts no responsibility for any issues arising from reliance on the information provided.