by Asim Abbas
11 November 2026 
Trivial benefits and staff parties: tax-free perks for employees
Trivial benefits and staff parties: tax-free perks for employees
There are a few ways to reward staff without creating a tax bill, as long as you follow the rules exactly.
- Trivial benefits up to £50 each
- Directors of close companies capped at £300 a year
- Staff parties up to £150 per head a year
- Cash and rewards for work don’t qualify
The trivial benefits exemption covers small gifts of up to £50, and the annual function exemption covers staff parties of up to £150 a head.
This guide explains both, the limits for company directors, and common traps.
Trivial benefits
A benefit is tax-free and doesn’t need reporting if all of these apply:
- It costs £50 or less, including VAT
- It isn’t cash or a cash voucher
- It isn’t a reward for work or performance
- It isn’t in the employment contract
Examples include a birthday gift, flowers, a bottle of wine or a seasonal gift card.
Directors of close companies
Directors and their family members working for a close company can receive trivial benefits worth up to £300 in total in a tax year. Each benefit must still be £50 or less.
Corporation tax calculator
See the deduction.
A company director receives six £50 supermarket gift cards across the year, for her birthday, Christmas and other occasions. That’s £300, the annual cap, tax-free and deductible for the company. If her spouse is also an employee, they can receive their own £300.
The annual function exemption
An annual event, such as a Christmas party or summer barbecue, is tax-free if:
- The total cost per head is £150 or less, including VAT, transport and accommodation
- It’s open to all employees, or all at a location
- It’s an annual event, not a one-off
The £150 is an allowance, not a free amount. If the cost is £151, the whole amount is taxable. It can be split across several events if the total stays within £150. Guests count in the head count.
Fixed-fee accountancy support
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Get a fixed-fee quoteCall 0161 531 4179VAT and Corporation Tax
The cost of trivial benefits and staff parties is usually deductible for Corporation Tax. VAT on staff entertainment can be reclaimed, but not the share relating to guests who aren’t employees.
If it doesn’t qualify
Benefits that don’t meet the conditions can be covered by a PAYE Settlement Agreement, where the employer pays the tax and NI, so the employee isn’t taxed. Otherwise they must be reported, through payroll or P11D, and from April 2027 through payroll.
Common traps
- Cash or cash-equivalent vouchers
- A gift for hitting targets
- Regular repeated gifts that look like pay
- Party costs over £150 per head
See HMRC’s guidance on trivial benefits, our guide to P11Ds and our payroll services.
What should I do next?
Including VAT.
£300 cap.
Per head, total year.
Frequently Asked Questions
What is the trivial benefits limit?
£50 per benefit, including VAT.
Is there an annual limit for directors?
Yes, £300 a year for directors of close companies and their family employees.
How much can I spend on a staff party tax-free?
Up to £150 per head a year, including VAT and extras.
Can I give staff cash under £50?
No. Cash and cash vouchers don’t qualify.
What if the party costs £160 per head?
The whole amount becomes taxable, unless you use a PAYE Settlement Agreement.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Ali Imran
I’m Ali Imran, an accountant at Wingate Accountants. I help sole traders, landlords and directors get their returns filed early and accurately, without the last-minute panic.
