Can I give my employees a tax free Christmas present?

2020 has been a tough year so many clients have got in touch to ask if they can give their employees tax free Christmas presents this year.

If you are an employer and looking to give a small Christmas bonus to your employees, then your best option is probably to give them a gift. In order to ensure that this is a tax free Christmas present, it is important to ensure that the trivial benefits in kind (BiK) rules apply.

There is no tax to pay on trivial benefits in kind (BiK) provided to employees where all of the following apply:

  • the benefit is not cash or a cash-voucher; and
  • costs £50 or less; and
  • is not provided as part of a salary sacrifice or other contractual arrangement; and
  • is not provided as a reward to the employee as part of their employment. For example as a bonus for hitting a sales target

For example a turkey that cost £45 would qualify. So would a £15 bottle of wine. It is also possible to provide employees with a gift voucher (not a cash-voucher) where the value is £50 or less. It is important to remember that the gifts must not be provided as a reward for the employees’ services but merely as a gesture of goodwill at Christmas. If you follow these rules then you have provided tax free Christmas presents to your employees.

There is an annual cap for directors of a ‘close’ company of £300 per year. If the Christmas gifts have a value of over £50 or cannot be counted as a trivial benefit then the gift must be reported on form P11D.  Class 1A NICs will be payable on the value of the gift.

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