Resources

Tax-free rewards

March 2020

It’s the employees that keep companies in business and when they’re well rewarded they work harder, smarter and stick around longer but can companies take advantage of tax-free rewards? The simple answer is yes, tax-free rewards are available. Not many companies realise that It’s easy to reward staff for their hard work and save money at the same time with tax-free rewards. Employees who feel valued through company recognition schemes are more productive, engaged and loyal to their business.

Under current UK law, everyone is entitled to £50 tax-free benefits for a range of reasons that don’t relate to the employee’s performance in their role. These type of tax-free benefits are called “trivial benefits” and represent a great opportunity for Employers looking to save on Benefit in Kind tax. 

Here are a few examples of tax-free rewards: 

Tax-free rewards:

  • Wedding gift 
  • Bereavement
  • Get Well
  • Wedding Anniversary 
  • Cheer up
  • Passing driving test
  • Gained qualification
  • Becoming a parent 
  • Good deed 
  • Birthday 
  • Christmas Gift
  • Easter 
  • Ramadan
  • Diwali
  • Hanukkah

If a company spending £100,000 stopped giving financial recognition for taxable reasons (e.g. Long Service, Sales targets, values-based recognition) and instead gave reward say on every employee’s Birthday then the Employer would save typically 30% of their tax bill, in this scenario saving £30,000 per year! These tax-free rewards are simple but powerful and can be easily administered using Each Person due to having to choose the ‘reason’ from a set of options which categorises the recognition and reward is given. 

Any of these reasons can be used when sending an ecard through Each Person. Whether you’re simply sending a nice message or adding epoints or a product or gift any of these benefits allow tax benefits for the above reasons saving your company valuable finance.

This way of administering workplace rewards gives Employers a full audit trail of their tax liability which is a huge benefit when completing PSA agreements for HMRC. Employers save time but crucially can save thousands of pounds each year due to how they classify their reward making them tax-free.

Here’s another blog you might like: ‘How to ask for a raise at work‘.

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