Income Tax (Earnings and Pensions) Act 2003 section 324

Small gifts from third parties

Section 324 sets out the conditions under which small gifts provided to employees by third parties (i.e. persons other than the employer) are exempt from income tax.

• Gifts to employees or their family/household members from third parties can be tax-free if five conditions (A to E) are all satisfied, covering who provides the gift, the reason for it, its form, and its value.
• The gift must not come from (or be arranged by) the employer or anyone connected with the employer, and must not be given as a reward for, or in anticipation of, specific services the employee performs in the course of their employment.
• The gift must not be cash, securities, or the use of a service — and the total cost to the donor of all eligible gifts for that employee in the tax year must not exceed £250 (including VAT, even if the donor can reclaim it).
• Non-cash vouchers and credit-tokens are not covered by this section but may qualify for a corresponding exemption under section 270; however, they are included when calculating the £250 annual limit per donor.