As the festive season approaches, many businesses are preparing to spread cheer with gifts and celebrations. However, it’s important to stay on the right side of HMRC rules to avoid any unwelcome surprises in the New Year.
Here’s how you can celebrate while ensuring you remain compliant…
Gifting your team – stick to the £50 ‘trivial benefits’ rule
If you’re treating your employees to festive gifts, keep in mind the limit of £50 (including VAT).
Gifts under this amount are considered ‘trivial benefits,’ which means no extra tax or National Insurance (NI) contributions are required.
Key rules to remember
- Cash and cash vouchers do not qualify under the trivial benefits exemption
- Directors and their families have an annual £300 limit for these trivial gifts
For gifts exceeding £50, HMRC considers them taxable benefits, making them subject to tax and NI.
The gift of time
Sometimes, the best gifts aren’t monetary. Offering your team a half-day off to shop, relax, or attend a festive event is a thoughtful (and cost-free) gesture – and it’s completely tax-free!
Spreading festive cheer to clients
Client gifts can be a great way to strengthen relationships, but only certain types of gifts are deductible:
- Branded promotional items – gifts like calendars, mugs or pens with your business logo are deductible, provided they cost less than £50 per person
- Product samples – sharing samples of your products with clients is also fully deductible
However, it’s important to keep in mind that gifts of food, drink, or tobacco – even if branded – are not tax-deductible.
Entertaining clients
While entertaining clients is often part of the Christmas celebrations, HMRC doesn’t allow tax deductions for client entertainment, so it’s important to plan your budget accordingly.
Get in touch
If you’re planning to spread holiday cheer through gifting or celebrations, understanding the tax rules is crucial. The PM+M tax team is here to help you navigate these complexities so you can focus on enjoying the festive season – get in touch by emailing enquiries@pmm.co.uk.
