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Business Tax  •  Personal tax  •  Probate and Inheritance Tax

5 Tax efficient gift ideas this Christmas

By RJP LLP on 14 December, 2018

If it has been a good year maybe you’re feeling generous because Christmas is just around the corner?

You might be wondering what you can legitimately gift to the many people in your life without attracting unwanted attention from HMRC?

Here’s a list of the gifts you can make – to employees, or to friends and family, without incurring any extra tax:

Business Gifts

 

  • Gifts to customers and staff are allowable as a tax deduction provided the total cost per individual per year is under £50 (classified as a ‘trivial benefit’).

 

  • In the case of customers, the gift should be conspicuously promotional – with a logo or clear advert for your business - and should not be food, drink or tobacco related (unless this is the nature of your business) or include gift vouchers.

 

  • In the case of employees, it must not be a bonus for performance and must not be cash or a cash based voucher e.g. gift vouchers for a retailer. Turkeys, hampers and alcoholic drinks under the £50 threshold are all allowable. Gifts of vouchers are taxable.

 

  • Christmas parties for employees are seen as a valuable perk, and staff, especially millennials, appreciate the opportunity to socialise with colleagues according to research carried out by Surrey events specialist, Clownfish Events.  Provided the cost per head does not exceed £150 and the event is open to every employee to attend, the entire expenditure can be offset against tax, and the VAT is recoverable. Partners are excluded from this benefit, so if you invite them to the ‘do’, this cost won’t be tax deductible, and neither can any associated VAT be reclaimed.

 

  • Christmas bonuses are of course always very welcome, but they are not tax free and they are subject to PAYE and NICs as additional salary.

 

Personal Gifts

 

  • Gifts to a spouse or civil partner are always tax free and assets can be gifted and exchanged between married couples and civil partners without incurring any tax.

 

  • Personal gifts of up to £3,000 can be made by any individual in any one tax year to any other individual, or gifted in total to any number of individuals.

 

PETs - (Potentially Exempt Transfers)

  • These have nothing to do with giving a cuddly animal and PETs can be made tax free to another individual at any time and up to any amount without suffering tax. Should you die within 7 years of making a gift which exceeds £3,000 in a tax year, the excess will fall back into your estate for inheritance tax purposes, subject to tapering relief.

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