Expenses and benefits: long-service awards

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1. Overview

As an employer providing long-service awards to your employees, you have certain tax, National Insurance and reporting obligations.

What’s included

What you have to report and pay depends on:

2. What’s exempt

You don’t have to report or pay on a non-cash award to an employee if all of the following apply:

  • they’ve worked for you for at least 20 years
  • the award is worth less than £50 per year of service
  • you haven’t given them a long-service award in the last 10 years

For example, you can give a non-cash award with a value of up to £1,000 for 20 years’ service.

Salary sacrifice arrangements

You do have to report long-service awards if they are a part of a salary sacrifice arrangement.

3. What to report and pay

If any of the long-service awards you provide aren’t exempt, you must report the costs to HM Revenue and Customs (HMRC) and deduct and pay tax and National Insurance on them.

Cash awards

Any cash you award to an employee counts as part of their earnings. You must:

  • add this amount to your employee’s other earnings
  • deduct and pay Class 1 National Insurance and PAYE tax through payroll

Non-cash awards

For employees with at least 20 years’ service and no previous award in the last 10 years, you must:

For all other employees you must:

Readily-convertible assets

If you award a readily-convertible asset to an employee with at least 20 years service and no previous award in the last 10 years:

  • add any value above £50 per year of service to your employee’s earnings
  • deduct and pay Class 1 National Insurance and PAYE tax through payroll

For all other employees:

  • add the total value to your employee’s earnings
  • deduct and pay Class 1 National Insurance and PAYE tax through payroll

Salary sacrifice arrangements

If the cost of the long-service awards is less than the amount of salary given up, report the salary amount instead.

These rules don’t apply to arrangements made before 6 April 2017 - check when the rules will change.

4. Technical guidance

The following guides contain more detailed information: