Staff benefits·By Simon Jacobs, CTA · ACA·30 September 2026·4 min read

When does a gift to staff become taxable?

In short: A staff gift is taxed when it fails a trivial benefit condition and no other exemption applies. Bikes, uniforms, one mobile phone and a yearly medical check have their own exemptions.

You can give tax-free gifts to your staff, but there's a fine line between a tax-free gift and one that ends up taxed as earnings.

When does a staff gift become taxable?

Gifts become taxable if they:

Cost more than £50
Are cash or cash vouchers
Are given in recognition of work or performance
Form part of a contractual obligation
Aren't for business purposes

The first four mirror the trivial benefits exemption. HMRC's guidance says you do not have to pay tax on a benefit that cost you £50 or less to provide, is not cash or a cash voucher, is not a reward for work or performance and is not in the terms of the employee's contract. You have to pay tax on any benefit that does not meet all of these.

How the exemption works, including the £300 annual cap for directors of close companies, is in trivial benefits for staff gifts and directors.

HMRC's manual adds that a benefit which fails a condition is taxed in the normal way, subject to any other exemption. It gives long service awards and a thank-you for good results in the year as examples of benefits provided in recognition of services, which will not qualify as trivial benefits.

What happens if you give an employee a car?

For example, giving staff a brand new car to use however they like counts as earnings. It's not just for business use, so they'll pay income tax and your company will pay National Insurance on the value of it.

HMRC's guidance for employees says you pay tax if you or your family use a company car privately, including for commuting, on a value that depends on things like how much the car would cost to buy and the type of fuel it uses. For the employer, a car available for private use is reported on form P11D, with Class 1A National Insurance on the value of the car benefit.

Restrict that car to business use only, and it can be tax exempt, though the conditions here are strict.

HMRC's guidance says a car available for business journeys only can be exempt, and that you must tell your employee not to use the vehicle for private journeys and check that they do not. Pool cars have five conditions in HMRC's manual. They include that the car is actually used by more than one employee, that any private use is merely incidental to the employee's other use of it, and that it is not normally kept overnight at or near an employee's home. The manual says it is not enough to satisfy four conditions and narrowly fail the fifth.

Which benefits have their own exemption?

There are also specific gifts that can be given tax-free, when the right conditions are met:

A bike for travelling to and from work
Work uniforms
A work laptop and phone
An annual medical checkup

Each one comes with its own conditions to qualify. Get them right, and these become a genuinely tax-efficient way to reward your team.

What are the conditions for each one?

Each exemption below is taken from HMRC's guidance for employers:

Bikes: lending or hiring bikes to employees does not count as an expense or benefit, as long as they are available to all employees and mainly used for getting to work.
Uniforms: you do not have to pay tax and National Insurance on most uniforms or protective clothing, but you may still have to report the expense. Other clothing worn at work is reported as a benefit.
Phones: there is nothing to report or pay if you provide the employee with only one mobile phone or SIM card and the phone contract is between you and the supplier.
Laptops: there is nothing to report or pay if the computer is provided for work purposes and the employee does not make significant private use of it.
Medical checks: only one periodic medical check or health screening a year is exempt.

For uniforms, phones, laptops and medical checks, the same guidance says they have to be reported if they are provided as part of a salary sacrifice arrangement.

We cover two of them in more detail in phones for staff and branded clothing and staff uniform.

Exemption limits and conditions change, and whether a gift is taxed depends on what is given, to whom and why, so this is general information rather than advice on your own staff benefits. If you want yours reviewed, see how we work or talk to us.

Common questions

They are unless an exemption applies. HMRC's guidance says you do not pay tax on a benefit that cost £50 or less, is not cash or a cash voucher, is not a reward for work or performance and is not in the terms of the contract. You have to pay tax on any benefit that does not meet all of these. See [Tax on trivial benefits](https://www.gov.uk/expenses-and-benefits-trivial-benefits).

Yes, if it is used privately. HMRC's guidance says you pay tax if you or your family use a company car privately, including for commuting, on a value that depends on things like how much the car would cost to buy and the type of fuel it uses. See [Tax on company cars](https://www.gov.uk/tax-company-benefits/tax-on-company-cars).

HMRC's manual says no car benefit arises on a pooled car that meets all five conditions. They include use by more than one employee, private use that is merely incidental to business use, and the car not normally being kept overnight at or near an employee's home. See [EIM23450](https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23450).

HMRC's guidance says lending or hiring bikes to employees does not count as an expense or benefit, as long as they are available to all employees and mainly used for getting to work. You do not report them or deduct tax and National Insurance on them. See [Expenses and benefits: bikes for employees](https://www.gov.uk/expenses-and-benefits-bikes-for-employees).