There is a trivial benefit-in-kind (BiK) exemption that applies to small, non-cash gifts (such as a bottle of wine or a bouquet of flowers) that are occasionally given to employees.

This exemption enables employers to offer modest, tax-efficient rewards while simplifying the administration of BiKs. The BiK exemption allows businesses to recognise employees in a small way without creating additional reporting obligations or tax liabilities.

Trivial benefits are a simple and effective way to provide gestures of goodwill or recognition, as long as they are not given as a reward for work performed or duties carried out. Typical qualifying occasions include events such as a marriage, the birth of a child or other personal landmarks.

Employers also benefit since these trivial BiKs do not need to be included in PAYE settlement agreements or reported on P11D forms, and they are exempt from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the benefit:

• costs £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 an employee’s contract.

Trivial benefits provided through a salary sacrifice arrangement are not exempt from tax. In such cases, the employer must report them on form P11D, using the higher of the amount of salary the employee gave up, or the cost of the trivial benefit provided.

For directors or officeholders of close companies (and their families), there is an annual cap of £300 on trivial benefit gifts. The £50 limit still applies per gift but allows up to £300 of non-cash benefits per person each year. If any single gift exceeds £50, the full value becomes taxable.

The tax you pay on the use of a company car depends largely on its CO2 emissions, so choosing a lower emission or electric vehicle can make a significant difference to your overall tax cost.

The benefits in kind (BIK) tax on company cars can be quite significant, with taxable rates ranging from 3% to 37% of the car’s list price when new. The rate depends on various factors, primarily the car’s CO2 emissions and fuel type. For instance, a petrol fuelled car emitting 155 g/km of CO2 or more would be taxed at the highest rate of 37% of its original list price. In contrast, an electric car with a range of 130 miles or more could benefit from the lowest rate of just 3%, significantly reducing the taxable benefit.

This creates a strong incentive for those driving company cars to switch to electric vehicles, as they would experience a noticeable reduction in their tax liability. This shift not only benefits the employees but also employers, who will see a decrease in Class 1A National Insurance contributions. These contributions are based on the total value of benefits provided in a tax year, so switching to electric vehicles helps lower overall costs for the employer.

Diesel cars attract an additional 4% supplement if they do not meet the Real Driving Emissions 2 (RDE2) standard. However, the supplement is removed entirely for diesel vehicles that are RDE2 compliant. The maximum BIK rate, including any diesel supplement, remains capped at 37%.

The taxable benefit is typically calculated based on the car’s manufacturer’s list price, which includes VAT, delivery charges, and number plates. The price considered is the list price on the day before the car is first registered. Any additional accessories fitted to the car also increase the taxable value. There are some exceptions. Employees can also reduce the list price by up to £5,000 if they make a capital contribution towards the cost of the vehicle. Special rules apply to classic cars, which have their own method for calculating the list price.

Using your own car or bike for work travel? You may be able to claim tax relief for business mileage.

If you are employed and spend your own money on items needed for your job, you may be eligible to claim tax relief on those expenses. However, you can usually only claim tax relief on items that are exclusively used for work purposes.

For example, you might be able to claim tax relief when using your own vehicle, whether it is a car, van, motorcycle or bicycle, for work-related travel. Generally, travel between home and your regular place of work does not qualify. However, if you travel to a temporary workplace or incur business mileage, tax relief is typically allowed.

Employers often reimburse mileage using a set rate per mile depending on the type of vehicle. HMRC publishes approved mileage rates that apply when employees use their own vehicles for business journeys. If your employer uses these rates, the reimbursement is not treated as a taxable benefit.

If you are reimbursed at a rate below the HMRC approved amount, you can claim tax relief on the difference through Mileage Allowance Relief. For cars, the rate is 45p per mile for the first 10,000 miles and 25p per mile thereafter. The rate is 20p per mile for bicycles and 24p per mile for motorcycles.

Additionally, there is a passenger payment of 5p per mile per colleague if you transport other employees during business journeys in a car or van.

Use your own vehicle for work? You could be entitled to a tax-free mileage allowance. Make sure you are not missing out on HMRC-approved rates.

If you use your own car, van, motorcycle, or bicycle for business journeys, you may be entitled to a tax-free mileage allowance from your employer. This is known as a Mileage Allowance Payment (MAP) and is designed to cover the costs of using a personal vehicle for work-related travel. Many employees routinely claim this allowance when driving their own vehicle to visit clients, travel between temporary work locations, or attend off-site meetings.

It’s important to understand that MAPs do not apply to ordinary commuting, that is, travelling to and from your regular place of work. However, where travel is genuinely work-related and qualifies as a business journey, the allowance can be a valuable tax-free benefit.

Employers typically reimburse employees using HMRC’s approved mileage rates, which are designed to reflect reasonable running costs. These rates are as follows:

• Cars and vans:
  • 45p per mile for the first 10,000 business miles in a tax year
  • 25p per mile for each mile over 10,000
• Motorcycles: 24p per mile
• Bicycles: 20p per mile

Where an employee carries a colleague as a passenger during a business journey, an additional 5p per mile per passenger can be claimed provided the journey is for business purposes. This extra allowance is also tax-free when paid by the employer.

If an employer pays less than the approved HMRC rates (excluding the passenger allowance), you may be able to claim the shortfall from HMRC utilising Mileage Allowance Relief.

Employees using company fuel for private journeys can sidestep a hefty benefit charge by repaying the full private fuel cost to their employer by 6 July 2025. Miss the deadline, and tax becomes unavoidable.

This repayment process is known as "making good," and requires the employee to repay the employer for private fuel no later than 6 July following the end of the tax year. For the 2024–25 tax year, the repayment must be completed by 6 July 2025.

If the repayment is not made by the deadline, the employee becomes liable for the car fuel benefit charge. This charge is calculated based on the vehicle’s CO2 emissions and the car fuel benefit multiplier. The charge applies regardless of the actual amount of private fuel used, making it potentially costly for employees who only use a small amount of fuel for private journeys, such as commuting.

To avoid the tax, the employee must fully repay the employer for all private fuel used during the year, including fuel used to travel to and from work. Accurate record-keeping is essential, as HMRC will only accept that no benefit has arisen if the full cost is repaid by the deadline. In many cases, repaying the private fuel cost can be more financially beneficial than paying the fuel benefit charge.