Trivial benefits: the £50 rule for staff gifts, and the conditions people miss

Written from primary sources · Editor-reviewed · Sources last read 29 September 2026

By the tmcmatch.co.uk editorial team · Published 29 September 2026 · Last reviewed 29 September 2026 · 9 min read

6 primary sources cited on this page. How we check what is on this site

An employer can give an employee a small gift free of income tax, National Insurance and reporting if it costs £50 or less and meets three further conditions: it is not cash, it is not a reward for work, and it is not something the employee is entitled to under their contract. Directors of small “close” companies are also capped at £300 a year. The rule is in section 323A of the Income Tax (Earnings and Pensions) Act 2003. This page quotes it, puts eleven common cases against it, and shows how it differs from the other two £50 rules and from the £150 party exemption.

Key points

£50 or less per benefit — and over £50, the whole amount is taxable.
Not cash or a cash voucher.
Not a reward for work or performance, and not contractual.
No reporting if all conditions are met.
Close company directors: £300 a year in total.

Eleven staff gifts against the rule

Common staff gifts against ITEPA 2003 ss.323A–323B and GOV.UK guidance, read 2026-09-29. Amounts are examples.
Gift	Result	Why
A box of chocolates or a bottle of wine for an employee’s birthday, £25	Exempt	Not cash, within £50, not a reward, not contractual
A £40 gift card for a supermarket	Check the voucher type	Condition A excludes cash and cash vouchers; a non-cash voucher is not excluded by that condition
£40 paid into payroll as a ‘treat’	Taxable	Cash (Condition A)
A £60 hamper	Taxable in full	Over £50 — there is no partial exemption
A £30 voucher for hitting a sales target	Taxable	A reward for performance (Condition D)
A team lunch where the cost per head cannot practically be split	Average cost per head	s.323A(5)(b)
Christmas turkey promised in the employment contract	Taxable	Contractual obligation (Condition C)
Anything under a salary sacrifice arrangement	Not exempt	Condition C; report on the P11D
Six £50 gifts in a year to a director of a close company	Exempt up to £300	Condition E and s.323B
A seventh gift to the same director	Taxable	Annual exempt amount of £300 used up
The annual staff party	Not a trivial benefit	Its own rule: s.264, £150 a head

The conditions, in the Act

s.323A(1) ITEPA 2003

No liability to income tax arises in respect of a benefit provided by, or on behalf of, an employer to an employee or a member of the employee's family or household if— a conditions A to D are met, or b in a case where subsection (2) applies, conditions A to E are met.

Read it on legislation.gov.uk

A: “Condition A is that the benefit is not cash or a cash voucher within the meaning of section 75.”
B: “Condition B is that the benefit cost of the benefit does not exceed £50.”
C: “Condition C is that the benefit is not provided pursuant to relevant salary sacrifice arrangements or any other contractual obligation.”
D: “Condition D is that the benefit is not provided in recognition of particular services performed by the employee in the course of the employment or in anticipation of such services.”
E applies only to close companies and their directors: the annual cap below.

GOV.UK’s summary of the same test: “it cost you £50 or less to provide it’s not cash or a cash voucher it’s not a reward for their work or performance it’s not in the terms of their contract”. And if all are met: “You do not need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.”

£50 is a cliff

“You have to pay tax on any benefits that do not meet all these criteria.” A £55 gift is not £50 exempt and £5 taxable; it is £55 taxable, treated like any other benefit that fails the test.

Gifts to several people at once

The cost is per benefit, and where splitting it is impractical the Act allows an average: the benefit cost can be “if the benefit is provided to more than one person and the nature of the benefit or the scale of its provision means it is impracticable to calculate the cost of providing it to each person to whom it is provided, the average cost per person of providing the benefit.” A team lunch for twelve at £480 is £40 a head.

Family members

The exemption extends to gifts to “an employee or a member of the employee’s family or household” — the same conditions apply.

Close companies: the £300 cap

“You cannot receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company. A close company is a limited company that’s run by 5 or fewer shareholders.” The Act sets it as an annual exempt amount: “The annual exempt amount is £300.” Each trivial benefit to such a director, and to members of their family who are not employees, counts against it. At six £50 gifts the year’s allowance is gone.

What does not count

Cash, however small.
Rewards: a voucher for hitting a target, a bonus-in-kind, a thank-you for extra hours — Condition D.
Contractual gifts: anything the employee is entitled to — Condition C.
Salary sacrifice: “If you provide trivial benefits as part of a salary sacrifice arrangement they’ll not be exempt.”

Three £50 rules that are not the same rule

The £50 figure turns up in three places, each worded differently, each applying to a different person and a different tax:

The three £50 rules, quoted
Rule	Who it is about	The wording
Trivial benefits (income tax)	Employees	“Condition B is that the benefit cost of the benefit does not exceed £50.”
Business gifts (corporation tax)	Clients and others	… “given to the same person in the same accounting period, exceeds £50” (s.1300 CTA 2009, Case B)
Business gifts (VAT)	Anyone the business gives goods to	“goods that cost less than £50 (excluding VAT) during any twelve month period to the same person. These must be given for business reasons.”

The income tax rule looks at each benefit. The corporation tax rule looks at the total to one person over an accounting period. The VAT rule looks at the cost excluding VAT over any twelve months. Client gifts are covered on business gifts: tax and VAT.

Trivial benefits and the staff party

The annual party is not a trivial benefit. It has its own exemption, and its limit is per head, not per gift: “no liability to income tax arises in respect of its provision if the cost per head of the party or function does not exceed £150”. That limit includes transport, accommodation and VAT. The detail, with corporation tax and VAT, is on staff parties and client entertainment. For VAT, HMRC’s manual lists “a free meal given by an employer to an employee” among gifts that are not supplies.

Why this site has nothing to gain from your answer

We are paid a fixed fee per enquiry, agreed in advance, identical whichever supplier receives it. Trivial benefits are here because they sit next to the rules on staff events and expenses that a travel and expenses policy has to get right.

Organising events or travel for staff?

Describe the requirement once. It goes to no more than three suppliers, once each.

For the policy

Set the gift budget at £50 or below, including VAT, per gift.
Never pay it in cash or put it through payroll as money.
Keep gifts separate from performance recognition schemes.
For close company directors, keep a running total against £300 for the tax year.

Whether anything else must be reported is on P11D and business travel. This page quotes ITEPA 2003 and GOV.UK guidance as read on 2026-09-29; it is not tax advice.

Common questions

What is a trivial benefit?

A small non-cash benefit an employer can give an employee free of tax, National Insurance and reporting. GOV.UK sets out four conditions: “it cost you £50 or less to provide it’s not cash or a cash voucher it’s not a reward for their work or performance it’s not in the terms of their contract”.

What is the trivial benefits limit?

£50 per benefit. Section 323A: “Condition B is that the benefit cost of the benefit does not exceed £50.” There is no annual limit for most employees; for directors of close companies the annual exempt amount is £300.

Are gift cards trivial benefits?

Condition A excludes cash and cash vouchers: “Condition A is that the benefit is not cash or a cash voucher within the meaning of section 75.” A gift card that can only be exchanged for goods or services is not a cash voucher, so that condition alone does not exclude it; the other conditions still apply.

What happens if a trivial benefit costs more than £50?

The whole amount is taxable, not the excess. GOV.UK: “You have to pay tax on any benefits that do not meet all these criteria.”

Do trivial benefits have to be reported to HMRC?

No. GOV.UK: “You do not need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.”

Can directors receive trivial benefits?

Yes, but directors of close companies have a cap. GOV.UK: “You cannot receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company. A close company is a limited company that’s run by 5 or fewer shareholders.”

Is a staff Christmas party a trivial benefit?

No. Annual parties have their own exemption under section 264 of ITEPA 2003, with a £150-a-head limit that includes transport, accommodation and VAT.

Sources cited on this page

Every figure above was read from the source it is attributed to on 20 September 2026. How we check this.