We all like to receive gifts so I think you’ll like today’s tax-saving tip I have for you.

Incentivise your staff and reduce your tax bill at the same time!

The idea that a happy, healthy workforce will generate greater productivity during the working day has caught on in a big way in recent years, so much so that the Government now offer tax breaks to help businesses to motivate their staff and keep them well.

The rules differ depending on your trading structure.

For Sole Traders

If you are self-employed, you do not need to report to HMRC or pay Employer’s National Insurance contributions on personal gifts such as Christmas, Birthday or wedding presents that you give to your employees and equally, the gift does not attract tax for the employee.

For Limited Companies

For limited companies there are more rules but there are still ways in which you can use gifts to incentivise your staff;

1. Throw a party – Christmas or Summer BBQ, it doesn’t matter. Although client entertaining is generally not an allowable expense for corporation tax purposes, employee entertaining is! As a result, you can boost staff morale and team cohesion by giving them an opportunity to let their down together whilst reducing your tax bill at the same time.
2. Staff gifts – Gifts such as a Christmas hamper or a bottle of wine on an employee’s birthday are not usually taxable providing the cost of the gift is trivial (typically under £50).  Such gifts make the employee feel valued which then boosts their morale, loyalty to the business and productivity. The cost of the staff gifts reduces company profits and in turn reduces the amount of corporation tax payable.
   NB. The employee incentives mentioned above do not incur a tax liability for the employee, however, any form of cash incentive (including gift vouchers exchangeable for goods and services) will attract tax for the employee either in the form of additional income tax or as a taxable benefit in kind which must be reported to HMRC on a P11D form.

We hope you have found his tax-saving tip interesting and informative. If you have any questions or would like further information about using employee incentives to reduce your tax bill, please contact Trinity on 02475 185286 or complete our online form.

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