By James Gibson, Director
As the festive season approaches, many directors look for ways to thank their teams, or even treat themselves, with gifts and celebrations.
While generosity is encouraged, it’s important to keep HMRC rules in mind to avoid unexpected tax charges. Here’s what you need to know:
Tax Allowances and Trivial Benefits for Directors
To qualify as a trivial benefit (and be exempt from Income Tax and National Insurance), all of the following must apply:
- The cost per benefit is £50 or less (including VAT).
- It is not cash or a cash voucher (gift cards are allowed if they cannot be exchanged for cash).
- It is not provided as a reward for work or performance (must be a genuine goodwill gesture).
- It is not part of a contractual obligation (including salary sacrifice arrangements).
- It is not provided in anticipation of work or services.
If any one of these conditions is not met, the entire benefit becomes taxable—not just the excess over £50. Check your planning carefully —one missed condition and the whole gift turns taxable.
For directors of close companies there is a cap of £300 per year.
Annual Dinner
HMRC allows an exemption for annual staff events (such as a Christmas party or summer BBQ) if:
- The event is annual (recurring once a year).
- It is open to all employees (not just directors, unless all staff are directors).
- The cost per head does not exceed £150, including VAT, transport, and accommodation.
Important: This is a limit, not an allowance. If the cost per head exceeds £150 by even £1, the entire amount becomes taxable as a benefit in kind. In other words, let the Grinch in for just £1 and he’ll take the whole party!
Plan Ahead and Enjoy the Season
Christmas is a time for celebration, but it’s also a good opportunity to make sure your generosity doesn’t lead to an unexpected tax bill. If you’re unsure about the rules or want to plan festive benefits in a tax-efficient way, speak to your accountant before making arrangements.
We are here to help you navigate these rules and keep your celebrations stress-free. For expert advice, please use the contact form on this page or email info@streets.uk
