In this section:
- Providing employee expenses and benefits: an overview
- Schemes that reduce expenses and benefits paperwork
- Expenses and benefits A to Z
Long-service awards
This guide explains your tax and National Insurance contributions (NICs) obligations if you make an award to an employee to mark their long service with your business.
On this page:
- Cash awards for long service
- Non-cash awards - service of at least 20 years and no previous long service award in past ten years
- Non-cash awards - service of less than 20 years or previous long service award in past ten years
- Where to report – understanding the £8,500 threshold
- Technical guidance
Cash awards for long service
Definitions or restrictions
You make a cash payment to an employee to mark their long service with your business.
What to report, what to pay
The payment counts as earnings, so:
- add it to the employee’s other earnings
- deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures
Work out the value to use
The value to use is the amount of your payment to the employee.
Non-cash awards - service of at least 20 years and no previous long service award in past ten years
Definitions or restrictions
You make a non-cash award to an employee for their long service and both of the following apply:
- the award marks at least 20 years of service by the employee
- you haven’t made another long-service award to the employee within the previous ten years
What to report, what to pay – awards worth
up to £50 per year of service
You have:
- nothing to report
- no tax or NICs to pay
What to report, what to pay – awards worth more than £50 per year of service
For employees earning at a rate of less than £8,500 per year, unless one of the exceptions listed below applies, then:
- report on form P9D – section A(2)
- you have no tax or NICs to pay
For company directors and employees earning at a rate of £8,500 or more per year, unless one of the exceptions listed below applies, then:
- report on form P11D – section A
- pay Class 1A NICs on the value above the £50 per year threshold
Work out the value to use
The value to use is the amount that exceeds £50 per year of service.
Exceptions
If the award you provide is a readily convertible asset then it’s treated in the same way as normal earnings, so you must:
- add the value above £50 per year of service to the employee’s other earnings
- deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures
Readily convertible assets – find out more
Non-cash awards - service of less than 20 years or previous long service award in past ten years
Definitions or restrictions
You make a non-cash award to an employee for their long service and either of the following applies:
- the award marks less than 20 years of service by the employee
- you’ve made another long-service award to the employee within the previous ten years
What to report, what to pay
For employees earning at a rate of less than £8,500 per year, unless one of the exceptions listed in the next section applies, then:
- report on form P9D – section A(2)
- you have no tax or NICs to pay
For company directors and employees earning at a rate of £8,500 or more per year, unless one of the exceptions listed below applies, then:
- report on form P11D – section A
- pay Class 1A NICs on the value of the award
Work out the value to use
The value to use is the full amount of the award.
Exceptions
If the award you provide is a readily convertible asset then it’s treated in the same way as normal earnings, so you must:
- add the value of the award to the employee’s other earnings
- deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures
Readily convertible assets – find out more
Where to report – understanding the £8,500 threshold
It’s important to choose correctly between forms P11D and P9D for each employee. The form to use depends on the whether the employee is a director of your company and on whether their earnings are above or below an annual rate of £8,500. For more information – including details of what’s included in the £8,500 threshold - follow the link below.
