Christmas Bonus Time is Here, but What are the Rules? Ashdown Hurrey is Here to Help.
5th December 2017
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When you're recognised by your employer for your excellent work over the past year, it always feels good. It helps make you feel like a valued member of the team, and can make Christmas extra special.

However, please be aware of the HMRC rules around this... Ashdown Hurrey accountants in Hastings explain it all:

Expenses and benefits: Christmas gifts

It is established practice that Christmas presents paid in cash to employees are in most cases taxable as earnings. This view has been upheld by the courts on many occasions and can mean that a gift from a well-intentioned employer is worth less than the giver or the recipient expected.

An alternative to a cash gift may be to give staff a seasonal gift such as a turkey or bottle of wine. In order to ensure that this is not a taxable gift, it is important to confirm that the trivial benefits in kind (BiK) rules apply.

Trivial BiKs apply where the BiK meets all of the following:

  • is not cash or a cash-voucher
  • costs £50 or less
  • is not provided as part of a salary sacrifice or other contractual arrangement
  • is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

Accordingly, gifts that cost under the £50 limit would qualify. It is also possible to provide employees with a gift voucher (not a cash-voucher) where the value is £50 or less. It is important to remember that the gifts must not be provided in recognition of the employees’ services but merely as a gesture of goodwill at Christmas.

There is no longer any need for employers to report these trivial benefits on P11Ds or PAYE Settlement Agreements. However, if the Christmas gifts have a value in excess of £50 or cannot be counted as a trivial benefit then the gift must be reported on form P11D and Class 1A NICs will be payable on the value of the gift.

For further information and more detail on this please click here.


How to pay self-assessment tax by adjusting your tax code

One of the less well-known ways of paying your self-assessment tax bill is to do so through your tax code.

This can only be done where all the following apply:

  • you owe a self-assessment balancing payment of less than £3,000
  • you are an employee or receive a company pension
  • you have for the 2016-17 tax year submitted a paper tax return by the 31 October 2017 or an online tax return by 30 December 2017 (as opposed to the normal 31 January 2018 deadline for electronic returns).

The coding threshold also entitles taxpayers to have tax underpayments collected via their tax code, provided they are in employment or in receipt of a UK-based pension. The
coding applies to certain debts such as self-assessment liabilities, tax credit overpayments and outstanding Class 2 NIC contributions. Instead of paying off debts in a lump sum,
money is collected in equal monthly instalments over the tax year.

The amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. This is a different limit to that for paying your self-assessment bill where
the amount owed must be less than £3,000. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000.

Finally, please note: self-assessment tax return online submissions are due on 31 Jan 2018. You can pay your tax through your tax code as above, but submit your return early
or on time to avoid penalties. For further information please click here.

If you have any queries about your tax return or other accounting related issues, then do give the team at Ashdown Hurrey a call!

About the Author


Member since: 23rd July 2014

Ian Noble is the Owner of 'thebestofHastings', the award winning franchise, providing integrated marketing solutions to SMEs, connecting to the Hastings community and promoting local events in 1066 Country....

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