What are trivial benefits, and how are they taxed?

Trivial benefits are benefits for employees and directors where no tax is payable, provided all the following conditions are met:

• It costs £50 or less for the employer to provide
• It isn’t cash or a cash voucher*
• It isn’t a reward for work or performance
• It isn’t in the terms of the employee’s contract
• Where the recipient is the director of a “close company” (or a member of their family), the annual total does not exceed £300 (inclusive of VAT)

* i.e. exchangeable for cash

Where all the above conditions are met, trivial benefits do not count towards taxable income or Class 1 National Insurance contributions, and there would be no need to report these on annual P11D/ P11D(b) forms. More info can be found here.

It is important to bear in mind that if the cost of the benefit exceeds £50, the whole amount is taxable and subject to NI, not just the amount in excess of the £50 threshold.

Examples of trivial benefits

• Flowers on the birth of a new baby
• Buying each employee a Christmas or birthday present
• Providing a £50 voucher (not exchangeable for cash)

Gift cards that are not exchangeable for cash can be given as a tax-free trivial benefit. However, employers would need to be careful if topping up gift card balances throughout the year (e.g., say an employer gave employees a gift card at the start of the tax year with a balance of £20, and proceeded to top-up each card by £20 per month. Although the employer may believe they are meeting the above criteria, it is likely HMRC would view the benefit in aggregate (£240 in total). As this exceeds the £50 limit, the trivial benefits exemption would not apply).

Benefits not covered by the trivial benefits exemption

Any trivial benefits provided via a salary sacrifice arrangement will not be exempt, and so tax and NI will apply. These benefits will need to be reported on form P11D.

Any other benefits provided to directors/ employees will have to be declared to HMRC and any tax and NI on these benefits paid via form P11D.

If you would like to see if your business could provide trivial benefits, feel free to get in touch with us.

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