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Gift Vouchers - a tax free way to reward your employees (and yourself!)

Gift vouchers can be a great way to reward staff for all of their hard work and boost team morale. The best thing is they can be tax free - if certain conditions are met.

There’s all sorts of gift voucher providers out there, so there’s bound to be something to suit everyone’s fancy from John Lewis vouchers for your fancy homeware to Deliveroo vouchers for a takeaway treat!

 So how does it work? Here’s a quick run through of the boxes we need to tick:

  • the cost of providing the benefit does not exceed £50 per employee (or on average when gifts are made to multiple employees);

  • the benefit is not cash (and not a cash voucher);

  • the employee is not entitled to the benefit as part of a contract (including salary sacrifice). It has to be a genuine perk that’s not written into an agreement;

  • the final one is the most tricky - the gift voucher must not be provided as a reward for any specific work done by the team member (e.g. working overtime) as an alternative to paying wages or salary. It has to be genuinely provided as a gift in addition to their pay.

If any of these conditions are not met then the gift voucher will be taxed as a ‘taxable benefit’ in the same way as their normal pay, which totally defeats the object.

Unlimited gifts

There are no limits on how many gift cards your business can hand out over the course of a year, provided you stick to the rules above.

Theoretically, you could give each employee a £50 gift card every day of the working year! However, HMRC would no doubt view this activity as suspicious, and it would be hard to justify that the gift vouchers were genuinely a one-off gift, and not forming part of the team member’s pay.

What about directors?

Great news! As directors you’re also entitled to ‘trivial benefits’ which encompasses gift vouchers too. The same conditions as above apply, but the exemption is capped at £300 in total per tax year.

That means that so long as each one is less than £50, the company can reward you with a total of £300 of “trivial gifts” per tax year.

Keep in mind that the trivial gifts allowance can also be used to cover low-value entertaining costs (meals, drinks, rounds at the pub), which all go towards using up the £300 annual allowance.

Where should we get the gift vouchers from?

As mentioned above there are loads of providers and options out there. Here’s a couple of links to websites that discuss a few of the providers out there:

If you have any more questions on any of that, feel free to get in touch.

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