Tax on staff gifts, trivial benefits and long-service awards

A small gift from your employer is tax-free if it passes four tests. It must have cost the employer £50 or less to provide, it must not be cash or a cash voucher, it must not be a reward for your work or performance, and it must not be a term of your contract. HMRC calls this a trivial benefit. If all four are met, nobody pays tax or National Insurance and the employer does not need to tell HMRC. Fail any one and the gift is taxable.

The four tests

The £50 is the cost to your employer of providing the benefit. Cash and cash vouchers are always outside the rule, whatever the amount, because HMRC treats cash as earnings. Anything given as a thank you for hitting a target, covering extra shifts or good performance is a reward for work, so it is not trivial. And if the benefit is written into your contract, it is not trivial either, even if small.

Typical gifts that fit are a birthday card and flowers, a box of biscuits, or a small present at the end of a school term from a head teacher or a ward manager to the whole team. That is general information, not a ruling on a specific gift. If you are not sure, HMRC’s employer helpline can say whether something counts, and your employer is responsible for getting it right.

A hypothetical example

Say a ward manager buys each team member a £30 hamper at the end of a busy winter. It is not cash, not a reward for hitting a target and not in anyone’s contract, so it is trivial: no tax, no National Insurance, nothing on the payslip. Now say the same manager hands out a £60 hamper to one person for covering extra shifts. It costs more than £50 and it rewards work, so it fails two tests and payroll would have to tax it.

Salary sacrifice

If an employer provides trivial benefits as part of a salary sacrifice arrangement, they are not exempt. The employer then reports on form P11D whichever is higher: the salary you gave up, or what it paid for the benefits. See salary sacrifice schemes for how those arrangements work, and P45, P60 and P11D for what the form shows.

Directors of close companies

There is a separate limit of £300 in a tax year for the director of a close company, meaning a limited company run by 5 or fewer shareholders. That is unlikely to touch NHS trusts, councils, schools or other public bodies.

Long-service awards

A different rule covers gifts for long service. An employer does not have to report or pay anything on a non-cash award if you have worked for them for at least 20 years, the award is worth less than £50 per year of service, and you have not had a long-service award in the last 10 years. HMRC’s example is a non-cash award worth up to £1,000 for 20 years’ service.

Cash is outside this exemption. If the award is part of salary sacrifice, it must be reported. Other awards, such as shares, need reporting and may be taxable, and the rules also look at how much it is worth and how long you have served.

Benefits that are taxed

GOV.UK says you pay tax on company benefits such as cars, accommodation and loans, and that your employer takes it through PAYE. Tax on medical insurance premiums paid for you applies. Interest-free or low-interest loans are taxable if they are worth more than £10,000. Some benefits can be tax-free, including childcare and canteen meals, and so are some health benefits, such as annual check-ups and medical insurance when you work abroad. Cash payments are earnings, so tax and National Insurance are due on them, as covered in how bonuses are taxed.

Payroll giving is a different thing again, covered in payroll giving.

If something is taxed

If you find a benefit has been taxed, check your payslip and the P11D if you get one. Ask your employer’s payroll team to explain how they treated it before contacting HMRC.