As a freelancer or contractor, you’re always on the lookout for ways to make your financial life a little bit easier. One of these ways is through something called ‘trivial benefits’. Now, don’t let the name fool you – there’s nothing trivial about the potential savings!
What’s a Trivial Benefit?
Imagine a small ‘thank you’ gift from an employer to an employee. That’s essentially what a trivial benefit is. The cherry on top? These gifts don’t count towards your tax or National Insurance, as long as they meet a few simple conditions:
- The gift costs £50 or less.
- It’s not cash or a cash voucher.
- It’s not a reward for work or performance.
- It’s not part of a work contract.
So, a trivial benefit could be a meal out to celebrate a birthday, a Christmas gift, or flowers to celebrate a new baby. Just remember, a working lunch or a reward for hitting targets doesn’t count as a trivial benefit.
Can Directors Claim Trivial Benefits?
If you’re a director of a ‘close’ company (a company run by five or fewer shareholders), you can also enjoy trivial benefits. However, there’s a yearly limit of £300 for directors, and you can only claim six benefits in a tax year.
What About Salary Sacrifice Arrangements?
If you give trivial benefits as part of a salary sacrifice arrangement, they won’t be tax-free. You’ll need to pay tax and National Insurance on them and report them on a form called P11D.
Can You Claim VAT on Trivial Benefits?
Yes, you can claim VAT on trivial benefits if the cost includes VAT and you have a VAT receipt.
What About Staff Parties?
In addition to trivial benefits, you can also claim for staff parties or functions. These can be claimed as an annual event or staff entertaining allowance, currently set at £150 per head. This allowance includes the cost of food and drink, accommodation, and transport.
Conclusion
Trivial benefits are like a hidden treasure in the world of tax savings. They’re a fantastic way to boost morale and show appreciation, all while keeping your finances in check. Just remember to stick to the rules to keep these benefits tax-free.
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