Trivial Benefits — Not So Trivial for You!

As a Director of a limited company, you have various ways to take your income from the business, ranging from a straightforward Salary to Dividends — and the tax obligations for these vary considerably.

While contributing fairly to the national finances is everyone's duty, no-one wants to pay tax they don't need to.

However, many company Directors are not aware of one tax-free entitlement — Trivial Benefits!

Expenses, Benefits and Tax

Your company is entitled to pay its employees or Directors a wide range of expenses and benefits. Common examples include travel expenses, company car and health insurance, but the list is a long one.

Some benefits known as Benefits in Kind are treated as part of the salary and therefore subject to income tax. The company has the obligation to report the expense or benefit to HMRC and to pay any employer's National Insurance contribution that may be due.

However, this is not true of all benefits. Some of the smaller ones, known as trivial benefits, are tax allowable.

What Are Trivial Benefits?

"Trivial Benefit" is a term applied to some small benefits which are not liable for tax. To count as a trivial benefit, it must be worth £50 or below and fulfil the following conditions:

  • The benefit must not be either cash or a cash voucher.
  • The benefit must not be a work or performance related reward.
  • The benefit must not be specified in the contract as a term of employment.

In addition, any trivial benefits provided as part of a salary sacrifice scheme are counted as taxable. However, as long as the benefits aren't worth more than £50 and don't come under any of the categories above, they can be given tax free as Trivial Benefits.

What Does This Mean for You?

As a Director of your limited company, you have as much right to receive trivial benefits as any employee. Each specific benefit cannot be worth more than £50, but that doesn't mean that £50 is the limit to what you're entitled to receive.

In fact, you are allowed to be awarded vouchers of £50 at a time up to a total value of £300 in the course of the accounting year.

As noted above, the vouchers cannot actually be for cash, but you can get £300 worth of goods or services without having to pay income tax or National Insurance.

It may not be a large sum, but especially in these difficult times an extra £300 tax free might be welcome.

Trivial Benefits are just one of a number of ways that you can legitimately reduce the tax burden on what you earn from your business.

If you want to find out others, get in touch with Grace Certified Accounting for a chat.

I hope this information helps your business run more smoothly through these difficult times.

Stay safe

Dora Ngoma

Director & Managing Partner

Grace Certified Accountants

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