Christmas gifts to employees – automatically free of tax in 2016!

We remind employers that this is the first Christmas that you can provide a small gift to your employees free of tax.

A new exemption for trivial benefits that was introduced in April this year. This new exemption means that employers have, since 6 April 2016, been able to make gifts of up to £50 each to their employees completely free of tax and also without having to contact HMRC at all to tell them about the gift. (Employers will be expected to keep their own records of trivial benefits made to employees.)

The law says that the benefit is exempt from tax if all the following conditions are satisfied:

  • the cost of providing the benefit does not exceed £50.
  • the benefit is not cash or a cash voucher.
  • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements).
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services).

Previously, there was no monetary limit below which a benefit was to be regarded as trivial – it was a question of common sense and judgement as to the type and the amount of benefits that was trivial. The new system is much clearer. You can find out more about it on GOV.UK .