Trivial benefits may seem like a small perk, but for small business owners, they can offer big advantages when used effectively. These tax-free benefits let employers reward staff or directors without the hassle of extra tax or National Insurance contributions. However, understanding HMRC’s definition of trivial benefits is key to staying compliant.
This blog breaks down the trivial benefits, outlines HMRC’s rules, and explains how limited companies can take full advantage of them. We’ll also share real-life examples to help you use trivial benefits creatively and within the guidelines. By the end, you’ll know
- how to use trivial benefits to boost employee morale,
- reward yourself as a director, and
- stay fully compliant with HMRC.
Whether you’re a small business owner or run a limited company, this guide will teach you how to make the most of these tax-free perks while keeping things simple and stress-free.
What is a Trivial Benefit?
What Are Trivial Benefits?
Trivial benefits are small gifts or perks provided by employers that qualify for tax exemptions under HMRC rules. These benefits are designed to boost employee morale without creating extra tax obligations. They are typically low in value, unrelated to performance, and aim to enhance workplace satisfaction.
HMRC Trivial Benefit Rules
To be classified as a "trivial benefit" and exempt from tax or P11D reporting, these conditions must be met:
- Cost Limit: The total cost to the employer must be £50 or less (including VAT).
- Non-Cash Benefit: The benefit cannot be cash or a cash voucher (gift cards are acceptable within the limit).
- Not Linked to Work Performance: It cannot be tied to performance, rewards, or incentives for work-related outputs.
- Not in Employment Terms: The benefit must not be written into the employee’s contract or employment terms.
When all these criteria are fulfilled, the benefit is considered "trivial" and is completely tax-free. Employers don’t need to report it on a P11D form, and employees won’t have to pay income tax on it.
How many trivial benefits can an employee have in a year?
There is technically no limit to the number of trivial benefits an employee can receive, provided each benefit meets HMRC’s criteria and does not exceed £50 (including VAT) per instance. To remain tax-free, however, these benefits must also be considered "infrequent" and "not routine." Failing to meet these conditions could disqualify them from exemption.
Why Trivial Benefits Matter for Small Businesses
Trivial benefits bring several advantages, particularly for small and growing businesses striving to maintain staff morale without straining budgets.
- Tax-Free Perks
For companies and employees alike, the tax-free nature of trivial benefits offers a significant reduction in administrative workload. You won’t need to factor these gifts into payroll taxes or National Insurance. - Employee Morale Boost
Small gestures make a big difference. A well-chosen trivial benefit can show employees that you value their contribution without tying it directly to performance metrics. - Strengthens Workplace Relationships
Non-monetary benefits build goodwill and foster closer ties between employers and teams, helping to create a workplace culture of mutual appreciation.
Trivial Benefit Examples
Looking for creative ways to make the most of trivial benefits? Here are some popular and thoughtful examples that comply with HMRC’s guidelines:
- Coffee Shop Gift Cards (under £50): A simple yet appreciated gesture for your team’s weekly coffee fix.
- Seasonal Treats: Delight your employees with chocolates, wine, or festive hampers during the holidays.
- Lunch on the Company: Treat your team to a catered lunch or meal delivery, staying within the £50 limit.
- Flowers or Small Birthday Gifts: Celebrate individual milestones with a personal and meaningful touch.
- Tickets to Local Events (within the threshold): From art exhibitions to comedy nights, these experiences add a personalized flair.
Important: If the value exceeds £50, even by a penny, the benefit no longer qualifies as trivial. Be sure to stick strictly to the limit.
How to Use Trivial Benefits for Directors
Do Directors Get Trivial Benefits?
If you're the director of a limited company, you can leverage the HMRC trivial benefit rules for personal perks or those shared with your fellow directors. It’s worth noting that while you—as a director—are also an employee, you must still comply with the same set of rules.
For more about the responsibilities and duties of a limited company director click here.
Here's how directors of a limited company can use trivial benefits strategically while staying compliant with HMRC guidelines.
Annual Savings Tip for Directors
You can allocate trivial benefits £300 per director, per year tax-free.
Directors can take full advantage of this annual limit by using it towards the end of each financial year and claiming an annual bonus or gift equivalent to £300 without creating additional income tax obligations.
Directors can offer themselves multiple trivial benefits throughout the fiscal year without violating taxation rules. By staggering multiple benefits (with each under the £50 threshold), directors can receive cumulative tax-free perks.
For example, you could give yourself a trivial benefit worth £50 every month—creating up to £600 of tax-free perks annually. Just ensure every instance meets the full set of HMRC rules.
Missteps to Avoid with Trivial Benefits
While trivial benefits are straightforward, it’s essential to avoid common pitfalls.
- Exceeding the £50 Threshold
Even if the cost is £51, the full amount becomes taxable. Monitor expenses down to the penny. - Mistaking Trivial Benefits as Rewards
Linking benefits to performance will disqualify them from tax exemptions. Keep trivial benefits for morale-boosting purposes only. - Including Cash or Cash Vouchers
Any benefit that can be easily exchanged for cash immediately violates HMRC's non-cash rule. Use vouchers that are not convertible to cash. - Not Properly Documenting Costs
Although HMRC doesn’t require reporting trivial benefits, it's wise to maintain accurate internal records in case of audits. Transparency and documentation are non-negotiable.
How to Record and Stay Compliant
Although you’re not required to report trivial benefits to HMRC, it’s a smart practice to document these perks and keep related receipts for your records. A simple spreadsheet can do the trick—track the type of benefit, its cost, the employee who received it, and the date it was provided.
This habit not only ensures transparency within your business but also offers peace of mind should you need to justify these expenses during a tax review.
Make the Most of Tax-Free Perks
Trivial benefits may sound minor, but they present a great opportunity for small business owners to uplift team morale while leveraging tax-free allowances. By making a habit of asking an accountant first, and doing it later, these thoughtful gestures can deliver significant value to your workplace and help you manage finances effectively. There is no petty question when it comes to your finances, we`ll welcome all inquiries from you, ranging from “whether a box of chocolate as a Christmas gift to your employees counts as a benefit” to your corporate finances.
Reach out to our team of experts today and let us help you optimise your business—right down to the finer details.
