Gifting a Benefit in Kind to an employee
You can gift a Benefit in Kind (BiK) to your employees that won’t be subject to tax if:
- The benefit is not cash or a cash voucher (these will be subject to tax)
- The employee is not entitled to the benefit as part of any contractual obligation, such as a salary sacrifice scheme
- The benefit is not provided in recognition of particular services performed by the employee as part of their role
- The cost of providing the benefit doesn’t exceed £50 (including VAT)
You may wish to give your employees a present – a Christmas hamper, a bottle of wine, or a nice box of chocolates. As long as it costs less than £50 a head, it won’t be taxable. If the gift exceeds this value, it will need to be reported to HMRC and will be taxable under the normal Benefit in Kind rules.
For example, an employer awards a £60 John Lewis voucher to their employee for Christmas. The entire award would be subject to both Income Tax and NIC as the total cost exceeds the £50 limit. It is important for you to understand that it is not just the excess over £50, but the full amount.
There is no limit on the number of trivial benefits that you can provide, as long as it doesn’t exceed £50 each time. However, where you are a ‘close’ company and the benefit is provided to an individual who is a director or other office holder, the exemption is capped at a total cost of £300 for the tax year.
Your employees can save tax of £10 for basic rate taxpayers and £20 for higher rate taxpayers each time you, as their employer, give them a trivial benefit gift. Officers of a close company can save up to £135 in tax.
For more advice on how you can reward your employees in a tax-efficient way, contact us by email or on 01295 250401.
