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The laws and rules of business gift cards

Gift cards up to £50 per occasion qualify as tax-free trivial benefits under HMRC rules

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The laws and rules of business gift cards

Giving gift cards to employees is a popular way to recognise the achievements of your team, but there are some important rules to be aware of before you give gift cards. In the UK, HMRC has clear guidelines on how gift cards are treated for tax purposes. Getting it wrong can lead to additional costs for your business. Understanding the laws and rules around business gift cards means you can give confidently and compliantly.

On this page, we cover the essential need-to-knows about the laws and rules of business gift cards, from tax thresholds to best practices.

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What are the typical rules regarding gift cards for employees?

There are several key rules that businesses need to be aware of when giving gift cards to employees in the UK.

The trivial benefit exemption. HMRC allows employers to give employees gifts worth up to £50 without triggering a tax liability, provided specific conditions are met.
Employee gifts must not be cash or cash-equivalent. To qualify for the trivial benefit exemption, the gift card must not function as a cash voucher. Retail gift cards tied to specific brands or a multi-brand platform are not considered cash-equivalent, while open-loop cards like those from Visa or Mastercard are not.
The gift must not be a reward for performance. If a gift card is given as a direct reward for work carried out or targets met, it is treated as earnings and is subject to income tax and
National Insurance, regardless of its value.
The gift must not be contractually obligated. If employees are entitled to receive a gift card as part of their contract or a salary sacrifice arrangement, it loses its trivial benefit status and becomes taxable.
The £50 limit applies per gift, not per year. Each individual gift must not exceed £50 in value. Multiple gifts can be given throughout the year, as long as each individual gift stays within the £50 threshold.
Directors of close companies face an annual cap. In the UK, ‘close companies’ are limited companies that are controlled by five or fewer shareholders. For each director of a close company, the total value of all trivial benefits is capped at £300 per tax year. Any amount over this becomes a taxable benefit.
Record keeping is recommended. Even when gift cards are within the trivial benefit exemption, it’s sensible to keep clear records of what was given, to whom, and on what occasion.

Do gift cards given to employees need to be taxed?

Whether or not a gift card that is given to an employee needs to be taxed depends on the circumstances in which it is given. When the trivial benefit rules are met, no tax or National Insurance is due and neither the employer nor the employee needs to report the gift to HMRC. This makes qualifying gift cards a tax-efficient way to show appreciation for your employees.

However, if any of the trivial benefit conditions are not met, the gift card becomes a taxable benefit in kind. In that case, the employer must report it to HMRC on a P11D form at the end of the tax year, and both income tax and National Insurance contributions will apply. For employees, this means the value of the gift card is added to their taxable income. For employers, they will need to pay Class 1A National Insurance on the value of the benefit.

If gift cards are given as part of a wider employee incentive scheme or as a bonus for hitting targets, they are treated as earnings from the outset and must go through payroll. In this case, PAYE tax and National Insurance apply in the same way as a salary payment. It is always worth consulting a tax adviser if you are planning a larger corporate gifting programme or are unsure whether your gifts qualify for the trivial benefit exemption.

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Buy business gift cards at giftcards.co.uk

Giftcards.co.uk is the UK’s leading platform for business gift cards and corporate gifting. With over 350 gift cards to choose from, covering everything from food and fashion to travel and entertainment, there is something to suit every employee and every budget.
Ordering business gift cards through our platform is straightforward. We guarantee quick and clear invoicing, a dedicated account manager, and the option to personalise cards with your company logo and branding. Whether you’d prefer to give physical cards for an in-person handover or digital e-gift cards for instant delivery by email, we can tailor everything to your business’s needs.

Browse our full collection of popular gift cards for employees for inspiration, and get in touch to receive a tailored quote within one hour.