While most employee perks are taxable, there are a few that come without the stress of a tax bill. Certain small gifts or tokens of appreciation are categorised as trivial benefits. Typically, these are non-cash, low-cost rewards that do not have to be reported to HMRC. Neither employees nor employers are charged tax. There is also no need to pay National Insurance.

Keep reading as this guide takes you through the full gamut of trivial benefits. There are specific rules, introduced under legislation in April 2016, that make these benefits tax-free.

What are the Applicable Rules for Gifts and Rewards to be Considered Trivial Benefits?

• The cost of the benefit (including VAT) must be less than £50 per employee.
  If the benefit is given to a group of employees and it’s impractical to work out the exact cost per individual, the average cost per employee must not exceed £50.
  
• The benefit must not be in the form of a cash amount or a cash voucher.
  Store gift cards are acceptable, provided they cannot be exchanged for cash.
  
• The benefit must not be provided as a contractual entitlement or under a salary sacrifice arrangement.
  
• The benefit must not be a reward for work or services, whether already performed or expected.
  It also cannot be a substitute for salary or part of an employee’s normal duties.
  

All of these conditions must be met. If any one of them is not satisfied, the benefit will be treated as a regular taxable benefit and subject to tax via payroll, a P11D, or through a PAYE Settlement Agreement (PSA).

If the cost of the benefit exceeds £50, the entire amount is taxable, not just the extra amount over £50.

Employees can receive multiple trivial benefits throughout the year, as long as each individual benefit is valued at under £50.

What happens in the case of a close company?

If your company is a close company—generally one that’s privately owned and controlled by five or fewer shareholders—there is an annual cap of £300 in trivial benefits that can be provided to a director or other office holder, including members of their family or household. This cap applies per individual, per tax year.

What does HMRC say about examples of trivial benefits?

HMRC provides several examples that typically qualify as trivial benefits, as long as the £50 limit and other conditions are met:

• Hosting a summer garden party for employees
  
• Sending flowers to celebrate the baby’s birth
  
• Giving a small gift to an employee at Christmas or on their birthday
  
• Taking an employee out for a birthday meal or treat
  

Always remember: each individual benefit must not exceed £50 per person to qualify as trivial. If it does, the full value becomes taxable.

Other Non-Taxable Benefits

In addition to trivial benefits, there are several other employee incentives that are non-taxable under HMRC rules. These benefits can be a great way to motivate and reward staff without incurring extra tax liabilities.

Here are some common examples:

• Business mileage payments at HMRC-approved rates for employees using their own vehicles:
  
  • 55p per mile for the first 10,000 miles (2026/27)
    
  • 25p per mile thereafter
    Any payments above these rates are taxable.
    
• Employer contributions to an employee’s registered pension scheme.
  
• Medical treatment up to £500, provided it helps a sick employee return to work after an absence of at least 28 days.
  
• One annual medical check-up and one health screening assessment per employee. Any follow-up treatment is taxable.
  
• Meals in the staff canteen and light refreshments or snacks are provided during work hours.
  
• Free parking at or near the workplace.
  
• On-site nurseries for employees’ children or childcare vouchers (under the old childcare voucher scheme, which is closed to new applicants but still applicable to some).
  
• Relocation or removal expenses up to £8,000 per move.
  
• One mobile phone per employee, as long as the contract is in the company’s name.
  
• Annual staff functions, such as a Christmas party or summer outing. The total cost must not exceed £150 per person (including VAT) per tax year.
  
• Use of a pool car—a company vehicle used by multiple employees for business purposes and not generally available for private use. It must not be kept overnight near any employee’s home.
  
• Reimbursement of business expenses, such as home office equipment for remote workers. These must be agreed in advance between the employer and the employee. Significant or personal-use expenses may still be subject to tax and National Insurance through payroll.
  

If you need help understanding trivial benefits or employee incentives, contact Cangaf to speak with one of our experienced accountants.

Further reading and official guidance

More guides and tools from our team:

• Payroll services in Bolton
• Payroll compliance for small businesses
• Leasing a car through your company
• National Insurance calculator

Official guidance from HMRC and GOV.UK:

• GOV.UK: trivial benefits
• HMRC manual: trivial benefits
• GOV.UK: reporting expenses and benefits
• GOV.UK: PAYE Settlement Agreements

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