Rewarding your valued employees is a great way to keep them happy, engaged and motivated.
When a member of staff clocks up an employment milestone, you want to show your appreciation for all their hard work. Giving them extra benefits or rewards helps them feel valued and one of the tax-free benefits that’s often overlooked is long-service awards.
What is a long-service award?
A long-service award could be a cash sum, a non-financial reward or even share options in the company. But only non-cash awards can be given tax-free. If you give a cash amount or share options, you’ll have to report this to HMRC and the employee will be charged tax and National Insurance (NI) on the reward.
How do I give a tax-free long-service award?
Provided that you follow some simple rules, awards to employees for long service can be made without creating any adverse tax consequences for your employee.
If your employee has received an award in the previous ten years, the value of that award is deducted from the amount of the later award. This will obviously lower the amount that can be made free of deductions.
How does this work in practice?
Let’s look at an example and see how you would make a long-service award.
For a 30-year award:
What happens if I give a cash award?
If you give a cash award to your employee, the full value must always be included in payrolled earnings and subject to PAYE and NI as normal.
Talk to us about giving long-service awards
When you have an employee who has been with you for 20 years or more, an award is a great way to recognise their long service. But to ensure you do this in the most tax-efficient way, you need to be aware of the associated tax rules.
We’ll help you draw up the rules for any long-service award scheme and can keep you informed of any future changes in the requirements.