UK Trivial Benefits and Christmas Party Exemption (2026/27)
Trivial benefits and staff party rules 2026/27: the £50 limit, the £300 cap for close company directors, the £150 per head annual party exemption.
Worked examples
Each assumes the benefit is not provided under a contract or salary sacrifice. Costs include VAT.
| Item | Cost | Trivial benefit? | Notes |
|---|---|---|---|
| Bottle of wine at Christmas | £25 | Yes | Not cash, not contractual, not a reward for work. HMRC's own example (EIM21866) treats a £25 Christmas bottle as covered. Counts towards the £300 cap for a close company director. |
| Non-cash gift voucher instead of wine | £25 | Yes | A non-cash gift voucher can be covered (EIM21866). A cash voucher, or anything exchangeable for cash, cannot. |
| Flowers for a bereavement or wedding | £45 | Yes | A personal occasion, not linked to performance. |
| Christmas hamper | £60 | No | Over £50, so the exemption does not apply at all and the whole £60 is a taxable benefit, not just the £10 excess. |
| Cash gift | £30 | No | Cash is never a trivial benefit, however small (EIM21866). It is taxed as earnings. |
| "Well done" meal for hitting a target | £40 | No | Provided in recognition of particular services, so it fails condition D in s.323A(9). |
| Reimbursing an employee for something they bought | £20 | No | A reimbursement is a cash payment, so it fails the cash condition (EIM21866). |
| Long service award after 25 years | £1,000 | Separate rule | Not a trivial benefit. A non-cash award marking at least 20 years of service is exempt up to £50 per year of service (s.323), if no similar award was made in the previous 10 years. |
Related guides
- UK Benefits in Kind Complete 2026/27 - full BIK reference.
- UK Director Pension Strategies 2026/27 - director remuneration.
- UK Employer Cost Calculator - employer NI.
- UK Dividend Tax 2026/27 Director Strategy - extraction options.
Frequently asked questions
What is the £50 trivial benefits exemption?
Under ITEPA 2003 s.323A a benefit is exempt from tax if all these apply: it cost £50 or less to provide (or, for a group, the average cost per person where exact costs are impracticable), it is not cash or a cash voucher, it is not provided under a contract or salary sacrifice, and it is not a reward for work or performance. GOV.UK says you then do not pay tax or National Insurance or tell HMRC. There is no annual cap for employees who are not close company directors.
What is the £150 per head annual party exemption?
ITEPA 2003 s.264 exempts an annual party or similar annual function open to employees generally (or to all at one location) if the cost per head is £150 or less. Cost per head is the total cost, including VAT, transport and accommodation, divided by everyone who attends, guests included. So an employee who brings a partner benefits from two heads. One-off events such as an anniversary party are not annual (EIM21690).
What if I hold two annual events?
The events within the exemption must total no more than £150 per head. If a £100 Christmas party and an £80 summer barbecue are both held, they cannot both be exempt; the Christmas party can be, and the barbecue is then taxable in full. HMRC exempts whichever events make best use of the £150 (EIM21690). The £150 is not an allowance: an event outside it is taxable on its full cost per head.
What counts as a reward for work or performance?
A benefit fails the exemption if it is provided in recognition of particular services the employee performed, or in anticipation of them (s.323A(9), EIM21864). A gift for hitting a sales target, an employee-of-the-month prize or a thank-you for a specific piece of work is caught. Gifts for personal occasions such as a birthday, wedding, birth or bereavement, or a seasonal gift given to all staff, are not.
Is there a cap for company directors?
Yes. If the employer is a close company, a director or other office holder, and an employee who is a member of their family or household, can receive exempt trivial benefits costing no more than £300 in total in a tax year (ITEPA 2003 s.323B). Benefits given to a family or household member who is not an employee count towards the director's £300. GOV.UK describes a close company as one run by 5 or fewer shareholders.
What if a benefit costs more than £50?
The exemption does not apply at all, so the whole cost is taxable, not just the amount over £50. The employer reports it on the employee's P11D (or payrolls it, or uses a PAYE Settlement Agreement) and pays Class 1A National Insurance at 15% for 2026/27. The same all-or-nothing rule applies to the £150 party limit (GOV.UK social functions).
Does VAT count towards the £50 limit?
Yes. HMRC measures the cost of a trivial benefit including VAT (EIM21865), and s.264(5) says the party cost per head includes VAT. A gift costing £42 plus £8.40 VAT costs £50.40 and is over the limit.
What records should an employer keep?
The exemption needs no reporting to HMRC, but you should be able to show each condition was met: the date, what was given, its cost including VAT, who received it and the occasion. For close company directors keep a running total against the £300 cap, including gifts to family or household members. For parties, keep the total cost and the number who attended so the cost per head can be shown.