Global Partner. Integrated Solutions.
16 July 2026
UK Payroll Update: Tax-free trivial gifts and increased approved mileage rates
 
Tax-free trivial gifts

The UK's trivial benefits exemption allows employers to provide employees with small gifts or benefits without creating a tax or National Insurance liability, provided certain conditions are met.

Key conditions
A gift or benefit will qualify as a trivial benefit if:
  • The cost to the employer is GBP 50 or less (including VAT) per employee
  • It is not cash or a cash voucher.
  • It is not provided as a reward for work or performance.
  • It is not included in the employee's employment contract.
Examples of qualifying gifts
  • Birthday gifts
  • Flowers for special occasions
  • Chocolates or hampers
  • Seasonal gifts
  • Small gift vouchers that cannot be exchanged for cash
Important considerations
  • If the value exceeds GBP 50, the entire amount becomes taxable, not just the excess.
  • Directors of close companies are subject to an annual cap of GBP 300 for trivial benefits.
  • Provided all conditions are satisfied, there is:
    • No Income tax liability
    • No National insurance liability
    • No P11D reporting requirement
Payroll impact
Since qualifying trivial benefits are exempt from tax and NIC, they generally do not pass through payroll and do not require reporting to HMRC, reducing administrative burden while providing a simple employee recognition tool.

Increase in Approved Mileage Rates

In May 2026, the UK Government announced an increase in the Approved Mileage Allowance Payments (AMAPs) for employees using their own vehicles for business travel. This is the first increase in the rate for cars and vans since 2011. The revised rate applies from 6 April 2026 and is effective retrospectively.

New mileage rates
Vehicle Type Previous Rate New Rate
Cars and Vans (first 10,000 business miles) 45p per mile 55p per mile
Cars and Vans (over 10,000 business miles) 25p per mile 25p per mile

 
Payroll considerations
  • Payroll systems should be updated to reflect the revised mileage rates.
  • Employers can reimburse employees at the approved rate without incurring a tax or NIC liability.
  • Employees reimbursed at rates below the approved rate may continue to claim Mileage Allowance Relief from HMRC for the shortfall.
  • Any reimbursement above the approved rate remains taxable.
Our Comments

These updates provide employers with additional flexibility to reward and support employees in a tax-efficient manner. The trivial benefits exemption continues to offer a simple method of employee recognition through small tax-free gifts, while the increase in Approved Mileage Rates better reflects the cost of business travel and provides greater tax-free reimbursement opportunities for employees using their own vehicles for work.

Payroll teams should review relevant policies, update payroll processes as necessary, and communicate these changes to employees to ensure full compliance and maximize available benefits.

These updates provide opportunities to better support employees while maintaining tax efficiency and payroll compliance.
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