GIVING GIFTS AS AN EMPLOYER 

GIFT GIVING AS AN EMPLOYER, AND YOUR TAX AND NATIONAL INSURANCE OBLIGATIONS

As a wonderful employer you may, on occasion, want to give your team members a gift.

This could be a gift for a Birthday, they may be celebrating a huge milestone in their life, there’s always the common splurge on employees at Christmas, or End of Year Treat etc…

As usual, as an employer, you have certain Tax and National Insurance (NI) obligations if you choose to be so generous.

GIFT GIVING TO EMPLOYEES AS A BUSINESS

As a Business, there are different rules depending on the type of gift that you give.

There is an EXTENSIVE list of all of the gifts on gov.uk – but we will summarise them for your here.

❇️ SELF-EMPLOYED do not need to report or pay Tax or NI on gifts given to their employees ❇️

TYPES OF GIFTS

As mentioned the list of gifts is extensive, but we will provide you with the information for the most common gifts employers give to their employees. 

Bonuses

For cash and non-cash bonuses you have certain reporting, tax and NI obligations. 

Cash Bonuses (including vouchers which are exchangeable for cash) are classed as income so you will need to add it to your employee’s other earnings and then deduct and pay PAYE and Class 1 NI as you normally would through Payroll.

Mileage (Own Cars)

Mileage Allowance Payments (MAPs) are what you pay your employee for using their own vehicle for business journeys.

You’re allowed to pay your employee a certain amount of MAPs each year without having to report them to HMRC. This is called an ‘approved amount’.

To calculate the ‘approved amount’, multiply your employee’s business travel miles for the year by the rate per mile for their vehicle.

Tax: rates per business mile

❇️ It does not matter if your employee uses more than one vehicle in a year – it’s all calculated together. ❇️

Christmas Bonuses

Same as Cash Bonuses (including vouchers which are exchangeable for cash) are classed as income so you will need to add it to your employee’s other earnings and then deduct and pay PAYE and Class 1 NI as you normally would through Payroll.

Long Service Awards

What you have to report and pay depends on:

• if the award is cash, non-cash or ‘readily-convertible assets’, eg shares
• how much the award is for
• how long the employee has worked for you
• if you’ve given them a long-service award before

❇️ You don’t have to report or pay on a non-cash award to an employee if all of the following apply:

• they’ve worked for you for at least 20 years
• the award is worth less than £50 per year of service
• you haven’t given them a long-service award in the last 10 years

For example, you can give a non-cash award with a value of up to £1,000 for 20 years’ service.

Team Parties

What you need to report and pay depends on:

• if it’s an annual event
• if it’s open to all of your employees
• if it costs more than £150 per head
• how many events you provide during the tax year
• whether the employee is a director, and how much they earn

❇️ You might not have to report anything to HM Revenue and Customs (HMRC) or pay tax and National Insurance. To be exempt, the party or similar social function must:

• be open to all your employees
• be annual, such as a Christmas party or summer barbecue
• cost £150 or less per person

WANT TO CHAT ABOUT THE RULES AND REGULATIONS OF GIFT GIVING TO EMPLOYEES?

We’re here to provide you with the best accounting and financial support you need.

Reach out to our professional and friendly team at Parker Whitwood using the contact information below.