As all the fun of the festive season draws closer, employers everywhere are searching for the perfect way to show appreciation to their dedicated staff at the end of yet another working year. One question that frequently pops up is 'Can I give my staff cash for Christmas?'. If this is a question that you've always wanted to know the answer to, then good news! In this blog post, we'll take a look at this popular question and explore the rules and considerations surrounding this query.
Tax Implications? Let's Unwrap Them!
When it comes to cash gifts for employees, the first factor to consider is the tax implications. Cash given as a bonus or gift from an employer to an employee will be treated as earnings. Therefore, you'll need to add the value to your employees other earnings and deduct and pay PAYE tax and class 1 National Insurance through payroll.
While you cannot give your staff cash as a Christmas bonus or gift without it being classed as earnings and paying tax and national insurance on it, there are certain exemptions that employers can take advantage of when it comes to organising social events and giving small gifts. We'll look at these areas next!
Employee Entertaining Expenses - Party Time!
One important exemption to be aware of is the one relating to employee entertaining expenses. This exemption applies to annual parties, functions, or events such as a Christmas party or a summer barbecue. Provided the function or event is open to all employees and the cost per head does not exceed £150 (inclusive of VAT), the expense can be claimed as tax-exempt. Whatever Christmas party ideas you have for your employees, you can spend up to £150 per person on the event without incurring any income tax or national insurance contributions. The good news is that this also applies to virtual Christmas parties too. Do bear in mind that this is a tax exemption and not an allowance. Therefore if you go as little as a penny over the £150 per person limit, you will pay tax on the full amount.
If you're a company that hosts multiple annual events each year for your employees, then you can still take advantage of the £150 per person tax exemption each year. HMRC says "As long as the combined cost of the events is no more than £150 per head, they’re still exempt."
Salary Sacrifice Arrangements
You do need to be aware that you'll have to report how much social functions and parties are worth to each employee if they are a part of a salary sacrifice arrangement.
Are There Many Party Nights Available Under £150?
Yes! We offer a versatile range of Christmas parties all across the UK, including major cities! Expect the Likes of London, Manchester and Birmingham Christmas parties, in addition to loads of other top locations - you'll never be far from a spectacular Christmas bash. Best of all, the bulk of our Christmas parties come in well under £150 per person, so you'll be able take advantage of the employee entertainment tax exemption!
Trivial Benefits - A Sprinkle of Joy
Another avenue to explore is the tax-free gift exemption, also known as trivial benefits. Trivial benefits allows employers to give their employees small gifts during the year without triggering any tax obligations. The current limit for trivial benefits is £50 per head per year. So, if you want to provide your employees with a little Christmas present in the form of goods such as a gift hamper, bottle of wine or a box of chocolates, you'll be able to do so as long as it falls within this £50 limit. This will be considered a tax-free benefit and you won't have to pay national insurance. You also won't have to let HMRC know if it falls under the £50 per head limit.
Any gifts that exceed the £50 limit will be taxable on the full amount, and you'll need to declare it to HMRC. A trivial benefit cannot be cash or a cash voucher, can't be a reward for an employees work or performance and can't be given if it's stated in their terms of contract. If you’re not sure whether a gift counts as a trivial benefit, we'd recommend calling the HMRC employer helpline.
Seek Some Professional Guidance
While the information provided offers a general overview of the tax implications related to cash gifts for employees in the UK, it's essential to acknowledge that tax laws can be intricate and subject to revisions. As a result, we'd strongly advise you to seek professional guidance from a tax specialist or take a read of government resources online (HM Revenue and Customs) to ensure full compliance with all regulations.
If the tax implications or administrative complexities of providing cash gifts become challenging, there are alternative ways to treat and gift your staff during the festive season. One option is to offer non-cash benefits, such as flowers, books or food and drink gifts. These alternatives can still provide a thoughtful and appreciated gesture to your employees without the same tax implications attached to cash gifts. Do bear in mind that the limit for an employee gift is £50. If the gift exceeds £50 per head, then the amount will be taxable and you'll need to declare it to HMRC.
To sum it up, while it is possible to give cash gifts to your employees for Christmas in the UK, there are some important tax rules to take into account. Be aware that any cash gifts or cash bonuses will be classed as earnings and will be taxable. Ensure that you familiarise yourself with any exemptions applicable, such as trivial benefits and employee entertaining expenses to see if you're exempt in these areas. If you're still unsure, we say that it's always best to speak with a tax professional or check out official government guidelines on the HMRC website.
Remember, the festive season is all about showing gratitude and appreciation for your employees' hard work. Whether you choose to provide cash gifts or explore alternative ways to treat your staff, the most important thing is to make them feel valued and celebrated - we'll cheers to that!
Still Looking To Book Your Christmas Party?
Whether you're planning a Cambridge Christmas party or a Brighton office Christmas party, you'll find loads of unforgettable Christmas ideas here at Fizzbox! Why not take a look at our top Christmas parties in your preferred location? We offer loads of brilliant locations up and down the UK, and we're confident that you'll find the perfect party night or experience for your group!