Planning to Give Your Staff Gifts This Christmas? Here’s How to Ensure They’re Tax-Free
Are Christmas Gifts to Staff Taxable?
Employers often choose to give seasonal gifts like Christmas or birthday presents. As long as the gift qualifies as a “trivial benefit,” there will be no tax or National Insurance charges. A trivial benefit is a gift valued at under £50, including VAT and any delivery costs. Common examples include a bottle of wine, flowers, or a box of chocolates.
What If a Christmas Gift Exceeds £50?
Gifts valued above £50 must be declared to HMRC, typically via the employee’s P11D form. Importantly, the £50 threshold is not an allowance. For instance, a £60 gift would be taxable in full, with the employee paying the tax and the employer covering National Insurance.
How Are Cash Bonuses and Vouchers Taxed?
Cash gifts or bonuses are considered earnings, meaning they will appear on the payslip and be subject to tax and National Insurance. Similarly, vouchers that can be exchanged for cash are treated as earnings and taxed at their full value.
What About Non-Cash Vouchers?
Non-cash vouchers, which can be redeemed for goods or services, are also subject to tax if their value exceeds £50. These must be reported on the employee’s P11D form. Vouchers valued at under £50 may fall within the trivial benefits exemption if the conditions are met.
Are Staff Gifts from Third Parties Taxed?
Employees may sometimes receive gifts from third parties, such as a bottle of Champagne from a client as a thank you. As long as the gift’s value does not exceed £250, it will remain tax-free for the employee.
What About Giving Christmas Gifts to Clients?
Gifts given to clients (that aren’t promotional) are not deductible against profits, as they are considered entertainment expenses. Non-deductible examples include alcohol, food hampers, or tobacco. However, promotional gifts can be tax-deductible if they clearly advertise your company (e.g., branded stationery, calendars, mugs).
DISCLAIMER: The information in this article is for general guidance and is not a substitute for professional advice. Please contact us for bespoke advice and guidance.
