Christmas is all about giving, so you might like to take the opportunity of giving a gift to your employees or your customers. In many cases, however, gifts are not tax-free.
A Christmas Bonus to staff members is treated as additional pay for tax purposes and will attract Income Tax and National Insurance under PAYE.
However, you can provide an employee with a personal gift up to the value of £50 which can be tax-free under the Trivial Benefits exemption introduced in 2016, provided all of the following apply:
- it is not in cash or a cash voucher,
- it’s not performance-related,
- it’s not in the employees contract.
Any gifts given to your employees from third parties (up to the value of £250 including VAT) do not need to be accounted for and are therefore tax-free.
You can provide an employee with a personal gift up to the value of £50 which can be tax-free!
Gifts to customers must be given with the aim of promoting or furthering your business if you want to claim tax relief on the cost. As such, they must display a clear advertisement, and cost less than £50 per individual. Food, drink, tobacco and gift vouchers are excluded and are not tax deductible.
Other topics to be aware of this time of year include:
- How to Avoid Legal Issues at Your Company Christmas Party
- Is My Christmas Party Tax Deductible?
- How to Deal With Seasonal Work Cover
- How to Prepare Your Business for Adverse Weather Conditions
If you would like to discuss this topic in further detail, please don’t hesitate to contact us.
This post was originally published in December 2018 and has been updated for accuracy and comprehensiveness.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.