Trivial benefits – one of the best kept tax saving secrets?
Trivial benefits are one of the most common tax allowances I see being underused by business owners.
They apply to all businesses with employees (i.e. sole traders can use this for their employees, but not themselves) but this article is going to focus on their application to limited company directors.
Read on to find out more about them and more importantly, why you, as a limited company director, should care about them!
What is the Trivial Benefits allowance?
For any employee, receiving a gift from your employer can help with morale and motivation. Usually, anything given to employees gives rise to a taxable benefit, but HMRC introduced the trivial benefits scheme to get around this, recognising the importance of being able to basically be a nice boss. It allows small gifts to be given to employees, tax free. And as a director of your company you can receive these gifts too!
For a gift to yourself as director, it needs to fall within the following criteria:-
- It’s £50 or under (including VAT). Not £52 – anything over £50 will become taxable as a benefit.
- Not cash (vouchers are okay);
For directors, there is a limit of what you can spend on gifts to yourself in a tax year. That limit is £300. And it must be broken down into individual amounts of no more than the £50 i.e. you can’t buy something for £300 and say it’s a trivial benefit. (just to note, there is no limits on what you can spend on employees)
To give you some ideas, here’s what you might buy for yourself (this is inspired by my business!):-
- Beauty treatments
- Alcohol
- Meals out
- Cinema trips
- Clothes
- Vouchers
- Days out
And remember – it’s good to share! You can provide trivial benefits to a family member and claim for these as part of your director’s allowance for the tax year. My husband and children tend to do quite well out of my trivial benefits.
More info on trivial benefits can be found on the HMRC website here
Not just tax free – but tax saving!
The beauty of trivial benefits is that your company will get a corporation tax deduction on the cost. And, even better, if there is VAT on the purchase then you can reclaim the VAT if you have a VAT receipt.
Honestly, what is not to love?
Think about all those little things you buy personally during the year and put them through the business. You are missing out on tax relief if you don’t.
What dates do you need to know?
The trivial benefits allowance works in line with the tax year, not your company year end. So 5th April.
As I write this on 26th March 2024, the tax year end is looming. Check what you have claimed in trivial benefits and check what else you can legitimately claim through your business, for yourself or your family. If you don’t have a separate code set up in your bookkeeping software to track this then you should consider setting one up.
Use it or lose it – don’t miss out!
Now that you have knowledge of this secret tax tip, don’t keep it a secret. Please share this blog with other business owners who you think could benefit from it.
Business owners often are scared to put non-business expenses through their company, which of course is good practice, but you need to know what can be legitimately claimed. Buy yourself a gift on the business and enjoy that extra tax relief! You deserve it.
If you need help with getting to grips with your trivial benefits then just get in touch.
