Is a long service award taxable in the UK?

Full answer

HMRC gives a specific exemption for genuine long service awards, but it is tightly conditioned. To be fully exempt from Income Tax and National Insurance, all of the following must apply: the award is not cash or a cash voucher (it must be a tangible item, or certain non-cash equivalents such as shares in the employing company); the employee has completed at least 20 years of service with the employer; no similar long service award has been made to that employee within the previous 10 years; and the value does not exceed GBP 50 for each year of service. Who it affects: long-standing employees and the employers rewarding them. Directors are treated the same as other employees here. How the limit works: multiply GBP 50 by the years of service to get the maximum tax-free value. For an employee with exactly 25 years' service, the cap is 25 x GBP 50 = GBP 1,250. A non-cash gift worth up to GBP 1,250 is then tax and NI free. If the gift is worth more -- say GBP 1,500 -- only the excess over GBP 1,250 (so GBP 250) is taxable, not the whole amount. If the award is cash or a cash voucher, none of this applies: it is simply earnings, taxed through PAYE and subject to employee National Insurance at 8% on earnings between GBP 12,570 and GBP 50,270 (2% above), plus employer NI at 15%. 2026/27 note: the GBP 50-per-year value cap and the 20-year and 10-year conditions are long-standing and unchanged on the rate card, but confirm current detail on gov.uk before relying on it. A taxable element can also be settled by the employer through a PAYE Settlement Agreement so the employee receives it tax free in practice.

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