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:
You make a cash payment to an employee to mark their long service with your business.
The payment counts as earnings, so:
The value to use is the amount of your payment to the employee.
You make a non-cash award to an employee for their long service and both of the following apply:
For employees earning at a rate of less than £8,500 per year, unless one of the exceptions listed below applies, then:
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:
The value to use is the amount that exceeds £50 per year of service.
If the award you provide is a readily convertible asset then it’s treated in the same way as normal earnings, so you must:
Readily convertible assets – find out more
You make a non-cash award to an employee for their long service and either of the following applies:
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:
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:
The value to use is the full amount of the award.
If the award you provide is a readily convertible asset then it’s treated in the same way as normal earnings, so you must:
Readily convertible assets – find out more
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.
