Tax Free Christmas Presents! How you can buy your family gifts using your Limited Company Trivial Benefits Annual Allowance.
HMRC allows your company to buy tax free Christmas presents or any gifts for employees (including directors) or direct family members (living in same household) up to value of £50 each as long as following applies;
- 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
You can gift each person or direct family member in same household up to £300 a year, as long as each gift is less than £50.
Please note however that if you make gifts to family members who are not employees or Directors the gift counts as part of your £300 allowance as a director.
So for example, you could buy; computer games, wine, store gift card (not transferable for cash), flowers, chocolates, personal training session, massage voucher, etc, and spend £300 in total on each employee or family member.
You could use this as a tax free way to give an employee a gift, or purchase family members gifts through the business, which you may have purchased anyway for normal birthdays, Xmas etc, and have the costs as allowable deductions for tax.
For example if you paid for gifts totalling £1,000 through the company, which you may normally have paid for personally, this would give you a tax saving in the company of £190 (corporation tax rate of 19%), and also save you personal tax on £1,000 of income, as you will not need to draw this from the company to pay for the gifts personally.
This trivial benefit amount is in addition to the £150 per person staff entertaining allowance. See more info here
Please separate out, and clearly indicate, which payments are for Trivial benefits in your company records and ensure you keep a note of amounts gifted per person in each tax year to 5 April, to ensure the £300 limit is not exceeded.
If you did exceed the £300 per person limit, this would become a taxable benefit for the individual and the company which would be required to be reported on forms P11D.
If you have any queries on Trivial benefits do not hesitate to contact us.
Full HMRC guidance on Trivial benefits can be found here.