BLOG

Tax-free trivial benefits

The tax exemption for trivial benefits is a useful one as it allows employers to provide certain low-cost benefits to employees without an associated tax or National Insurance liability, such as Christmas or birthday gifts. However, not all benefits qualify, and there are some pitfalls to be wary of.

What is a ‘trivial benefit’?

To qualify as a trivial benefit, the following conditions must be met.

1.  The benefit is not cash or a cash voucher. A cash voucher is one that can be exchanged for cash.
2.  The benefit cost is not more than £50.
3.  The benefit is not made available under a salary sacrifice arrangement or pursuant to a contractual entitlement.
4.  The benefit is not provided in recognition of particular services performed by the employee in the course of their employment or in anticipation of such services.

Where the employer is a close company (as is the case for most personal and family companies), the total value of tax-free trivial benefits provided in the tax year to a person who is a director or officeholder of that company or to a member of their family or household is capped at £300 a year.

Calculating the benefit cost

A benefit can only be a trivial benefit if the benefit cost does not exceed £50. The benefit cost will normally be the cost of providing the benefit. However, where the benefit is made available to more than one employee and it is impracticable to calculate the cost of providing it to each individual, the benefit cost is the average cost of providing the benefit. This is simply the total cost of providing the benefit divided by the number of people to whom it is provided.

Pitfall 1 – Rewarding service

While providing a bunch of flowers or a bottle of wine as a thank you when an employee works late might be a nice gesture, it is not one that falls within the ambit of the trivial benefits exemption as the gift is made to reward services provided by the employee. Likewise, if you provide an employee with a taxi home if they work late and the exemption for late night taxis is not in point, the trivial benefits exemption will not apply even if the fare is less than £50 as again the taxi home is provided as a ‘reward’ for working late.

Pitfall 2 – Salary sacrifice arrangements

The trivial benefits exemption cannot be used in conjunction with salary sacrifice arrangements.. If the employee gives up cash salary in return for a non-cash benefit, the trivial benefits exemption will not apply, even if the cost of the benefit received in exchange is not more than £50.

Pitfall 3 – Contractual obligations

The exemption does not apply to benefits to which the employee is contractually entitled. This applies not only to those explicitly stated in the employment contract, but also where there is an implied contractual arrangement. HMRC illustrated this with the somewhat extreme example of cream cakes being provided every Friday, which they argued created an implied obligation and, as such, the provision of the cakes would fall outside the scope of the trivial benefits exemption.

Pitfall 4 – Recurring benefits

Problems can arise if an app, season ticket or gift card is used to provide the employee with regular benefits. Where this is the case, the benefit cost is the annual value of providing the benefit, rather than the cost of each individual benefit. Consequently, where the annual cost is more than £50, the trivial benefits exemption will not apply, even if the cost of each individual benefit does not exceed the limit. For example, if an employee is given an app which allows them to book a monthly beauty treatment at a cost of £40, the trivial benefits exemption will not apply as, at £480, the total cost of using the app during the tax year is more than the trivial benefit limit of £50; it does not matter that each individual treatment only costs £40.

12/08/2025