Understanding HMRC trivial benefits: What employers need to know

Giving small gifts or perks to employees is a great way to boost morale and show appreciation. But when it comes to tax, even small gestures can have rules. That’s where trivial benefits come in. HMRC has specific guidelines to help employers understand which benefits are tax-free and which are not.

What is a trivial benefit?

A benefit is considered “trivial” by HMRC if it:

The cost of providing the benefit cannot exceed £50 per employee (including VAT), or the average cost per employee if provided to a group of employees and it is impracticable to work out the exact cost
Is not provided under a salary sacrifice arrangement. If you provide a benefit as part of a salary sacrifice arrangement, it can’t be classed as a trivial benefit, even if it meets the other criteria
The benefit is not cash or a cash voucher (but gift cards would qualify as long as they are not exchangeable for cash)
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 (or in anticipation of such services) or as part of their normal employment duties.

Special rules for close company:

In most instances, an employee can receive multiple trivial benefits throughout the year as long as each one does not exceed £50.

However, where the employer is a close company, the exemption is capped at a total cost of £300 in the tax year where the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household).

What happens if the rules are not met?

If a trivial benefit exceeds the £50 limit, the entire benefit, not just the excess amount, becomes taxable. This means:

For employees: The benefit will be subject to income tax and national insurance contributions, either reported via payroll or on a P11D form
For employers: The business may need to pay class 1A national insurance on the value of the benefit
For directors of close companies: If the total trivial benefits exceed £300 per tax year, the excess amount will be taxable.

To avoid tax complications, businesses should ensure each benefit stays within the £50 threshold and meets all HMRC criteria.

Examples of HMRC trivial benefits

Per HMRC’s guidance, some types of examples of trivial benefits are:

A birthday gift, such as chocolates or flowers
A meal out to celebrate a special occasion (where cost is less than £50/head)
A Christmas turkey or bottle of wine
Tea, coffee, or snacks provided at work
A small seasonal gift, like an Easter egg
Events with a cost per head of under £50
Provision of ad-hoc food stalls/vans

This is on the basis that the benefit per employee does not exceed £50.

What isn’t a trivial benefit

Anything provided frequently/regularly where there is a legitimate expectation of its provision. This may include weekly pizza Fridays or similar. There is a grey area around monthly provided benefits such as a food truck, so to avoid challenge from HMRC we would always advise events such as this to be more ad-hoc so there is no legitimate expectation of them.
Anything contractual
Long service awards (gifts given to employees in reward for longer service. There is a separate long service award exemption. The rules are:
- The award must be non-cash (e.g., a gift or voucher that is not readily convertible to cash)
- The employee must have worked for at least 20 years with the employer
- The award must be worth less than £50 per year of service (e.g., up to £1,000 for 20 years)
- The employee must not have received another long-service award in the last 10 years.
Star awards (or anything given in reward for performance)
Anything in connection with something else. A gift with total value £100 is not trivial, even when given as two £50 gifts (unless the gifts are unrelated, e.g. for a wedding and a birthday)
Events with a cost per head of over £50 (subject to annual exemption)
- The event must be open to all employees—it cannot be restricted to specific individuals or departments
- It must be an annual event, such as a Christmas party or summer gathering
- The total cost must not exceed £150 per person, including VAT. This covers all expenses, such as food, drinks, entertainment and transport
- If multiple events are held, their combined cost must remain within the £150 per-person limit to qualify for exemption
- If the cost exceeds £150 per person, the entire amount becomes taxable rather than just the excess