Company Directors - do you know about Trivial Benefits?
Updated: Jun 10
1. Trivial Benefits For Employees
You don’t pay tax on a benefit for an employee if all of the following apply:
It costs £50 or less to provide (if it's over £50, the whole lot is taxed)
It isn’t cash or a cash voucher
It isn’t a reward for work or performance
It isn’t in the terms of their contract (i.e. there’s no expectation of getting it)
Why don't you use this opportunity to support a small local business?
The type of Trivial Benefits that are allowed include:
Taking a group of employees out for a meal to celebrate a birthday
Buying each employee a Christmas present
Flowers on the birth of a new baby.
2. Trivial Benefits For Directors
If you’re a director of a closed company you can treat yourself too! A closed company has 5 or fewer shareholders.
Every little helps, so we recommend directors do this.....
Claim non-monetary items of up to £50 during the year
Make sure these 'Trivial Benefits' meet the conditions above
Don’t spend more than £300 per director in a tax year - there is a cap for directors (HMRC don’t want you to treat yourself too much 🙄)
Record these as a an expense in the accounts (set up a separate expense account so it’s easy to can track
Use a company card for purchases because personal expenses don't count unless the receipt is in the company name.
You won’t get rich on this tax saving, but why pay any tax that you don’t need to?
Over 5 years, this means a Limited company with 2 directors can extract £3000 from the company tax free. At today’s Corporation Tax rate, that’s £570 of tax that hasn’t gone to HMRC.
3. Trivial Benefits And HMRC
Trivial Benefits don’t count towards taxable income so you/your employee(s) don’t pay any Income Tax or National Insurance, and your company can claim Corporation Tax relief on the cost of the benefit(s).
Better still, HMRC don't need you to report these Trivial Benefits anywhere, so long as the stated conditions are met.
If any Trivial Benefit goes over the £50 limit, you’re liable for tax on the whole expense not just the amount over £50.
We provide our customers with the accountancy services that they need to keep HMRC happy. We also provide our customers with financial information and business advice. Our goal is to help our customers to improve and grow their businesses, so that they have more time and money to enjoy life.
Connect with Rebecca Webster, Electric Accountancy Director
Send me a message on LinkedIn to say hi, I would love to find out more about you and what kind of support you may need.
Want to see if we can help you?
Let’s have a quick call. This quick call is there to help you get clarity and see if we can help.