Category Archives: Employee Benefits

Employers looking to provide staff with small gifts or seasonal tokens of appreciation should remember the rules for tax-free trivial benefits.

A benefit can qualify as a trivial benefit where all of the following conditions are met:

• the benefit costs £50 or less;
• it is not cash or a cash voucher;
• it is not provided as a reward for work or performance;
• it is not provided under the terms of the employee’s contract or as part of a salary sacrifice arrangement.

Where these conditions are satisfied, there is generally no tax or National Insurance to pay, and the benefit does not need to be reported to HMRC.

Typical examples may include a modest Christmas gift, a bottle of wine, flowers or a non-cash gift voucher costing no more than £50. So, for example a turkey that cost £45 would qualify as would a £15 bottle of wine. However, care should be taken to ensure that the gift is simply a gesture of goodwill and not linked to the employee’s performance or duties.

If a trivial benefit is provided through a salary sacrifice arrangement, the exemption will not apply, and a taxable benefit may arise. In such cases, the amount reportable on form P11D will generally be the higher of the salary given up or the cost of the benefit provided.

Directors of close companies should also remember that there is an annual cap of £300 for trivial benefits. A close company is broadly a company controlled by five or fewer shareholders.

Employees who receive fuel from their employer for private use in a company car can avoid paying the car fuel benefit charge by reimbursing the full cost of the private fuel. This process, known as "making good," requires the employee to repay the employer for private fuel no later than 6 July following the end of the tax year. For the 2025–26 tax year, the repayment must be completed by 6 July 2026.

If the repayment is not made by the deadline, the employee becomes liable for the car fuel benefit charge. This charge is calculated based on the vehicle’s CO2 emissions and the car fuel benefit multiplier. The charge applies regardless of the actual amount of private fuel used, making it potentially costly for employees who only use a small amount of fuel for private journeys, such as commuting.

To avoid the car fuel benefit tax the employee must reimburse the total cost of all private fuel used during the year, including fuel used to travel to and from work. Keeping accurate mileage records is essential. HMRC will only accept that no benefit has arisen if the full cost is repaid by the deadline. In many cases, repaying the private fuel cost can be more financially beneficial than paying the fuel benefit tax charge.

The rules on claiming tax relief for working from home are changing for the new 2026-27 tax year. In most cases, employees will no longer be able to claim relief for homeworking, although claims can still be made for the previous four tax years. The removal of the tax relief was announced in the Autumn Budget last year and it is estimated that some 300,000 taxpayers will be affected by the change.

Relief is only available if you have to work from home for your job, for example, if your role requires you to live far from the office or your employer does not provide an office to work from. You cannot claim tax relief if you choose to work from home, including under flexible arrangements allowed by your contract.

Where eligible, you can claim for work-related household costs such as business phone calls or the additional gas and electricity used in your work area. You cannot claim for costs used for both private and work purposes, such as rent or broadband.

Tax relief can be claimed at £6 a week or for the exact amount spent, and the relief is calculated based on your income tax rate. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week, you will get £1.20 per week in tax relief (20% of £6). Evidence is required for claims, including receipts or bills if claiming actual costs.

Claims for the current and previous tax years can be made through https://www.tax.service.gov.uk/claim-tax-relief-expenses/claim-any-other-expense. If you complete a self-assessment tax return, you must claim through your tax return instead. The new rules mark a return to stricter pre-pandemic rules when tax relief was only available when working from home was required and not optional.

While company cars often come with tax implications, there are specific situations where the associated benefits may be exempt. There are circumstances where it can be possible to offer employees car benefits that are exempt from tax.

Exempt expenses and benefits include the following:

• Business-only use: This rule has been the subject of much case law over the years, but it has generally been established that to qualify for VAT recovery the car must not be available for any private use. This means that the car should only be available to staff during working hours for employment related duties or to travel to a temporary workplace. The business must also clearly tell their employees not to use the vehicle for private journeys and check that they don’t.
• Adapted vehicles for disabled employees: These cars are exempt if the only private use is for journeys between home and work and for travel to work-related training.
• Fuel paid by employees: The fuel benefit is removed when an employee pays for all their private fuel use or if the employer pays and the employee reimburses the amount (during the tax year).
• ‘Pool’ cars: Employers are not required to pay or report on 'pool' cars. These are cars that are shared by employees for business purposes only and normally kept on your premises. Employers must ensure the ‘pool’ car rules are properly adhered to.
• Privately owned vehicles: Employers do not have to pay anything on cars that directors or employees own privately.

Proper documentation and compliance are required in order to maintain these exemptions.

The trivial benefits legislation provides a simple and practical tax exemption that allows employers to give small non-cash benefits to employees without triggering tax or National Insurance charges.

To qualify as a trivial benefit, the cost to the employer must not exceed £50 per item. The benefit must not be cash or a cash voucher and must not be provided as a reward for work or as part of the employee’s contractual entitlement. It must also not be provided in recognition of particular services performed. Typical examples include modest gifts such as flowers, a bottle of wine, a meal voucher or a small seasonal gift.

Where these conditions are met, the benefit is exempt from Income Tax, employer’s and employee’s National Insurance and does not need to be reported to HMRC.

For directors of close companies, an additional annual cap applies. Such individuals are limited to £300 of trivial benefits per tax year, calculated as an aggregate of qualifying items. This limit does not apply to ordinary employees.

The rules are designed to reduce administrative burdens and provide clarity, but care is needed. Regular provision of benefits, or benefits that appear linked to performance, can fall outside the exemption.

Used correctly, trivial benefits offer a straightforward way for businesses to reward staff in a tax-efficient and low-compliance manner.