Christmas is the time of year when you want to be able to thank your employees for their efforts over the year.
It really helps improve morale when they receive an unexpected gift and this is the perfect time to do it.
But you don’t want to be gifting the taxman at the same time. There are ways to give a special end-of-year thank you to your staff that won’t spread the Christmas cheer to those who haven’t worked for it.
The rules are quite straightforward.
According to gov.uk, you don’t have to pay tax on a benefit for your employee if all the following apply:
- it cost you £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
This is known as a ‘trivial benefit’ which means you don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.
Festive gifts for employees often include a turkey, bottles of wine or Champagne or a food hamper.
But if you don’t want to give them an actual gift, there are other options, some which benefit the taxman and some that will have him crying all the way to the bank.
There may be a favourite shop where you employees could go and browse to choose their own gift. But a word of warning: If the voucher is exchangeable for cash, then it would be taxable. Buy them a voucher that can be exchanged only for goods or services and you beat the taxman.
Some companies have a bonus system in place, or it may be that you just want to say thanks for a job well done with a bit of extra cash in their December pay packet.
This will be processed in the same way as their salary and the lucky employee will unluckily have to pay tax and national insurance.
So, that generous £50 gift you wanted them to enjoy has also given Mr Taxman an unexpected bonus.
We all love a good Christmas party, don’t we? And as a company you can spend up to a £150 per head each year on entertaining without any tax implications. And that also includes partners.
Now that’s some party!
But, be careful, the £150 limit is for the whole year, so if you are having a summer barbecue as well, that will need to be considered when you are budgeting.
And as a further tip, do not exceed the £150 by even a penny or you will be taxed on the whole amount, not just the extra.
If we can offer any further advice on this subject, please give us a call.