Long-Service Awards: When a Loyalty Gift Is Tax-Free in 2026/27
A non-cash long-service award can be tax-free if you have at least 20 years' service and the value stays within GBP 50 per year of service. Here is how the exemption works with a worked example for 2026/27.
Recognising loyalty without a tax bill
When an employer wants to thank a long-serving employee, the tax system allows a genuine reward to pass tax-free, provided it follows specific rules. The long-service award exemption is narrow but useful, and it is often misunderstood, which can lead to either a missed opportunity or an unexpected tax charge.
The two main conditions
For a long-service award to be exempt from Income Tax and National Insurance in 2026/27, two conditions must be met:
- You have at least 20 years of service with the same employer.
- You have not received a similar award in the previous 10 years.
If either condition fails, the award is taxable in the normal way.
How much can be tax-free
The exempt amount is up to GBP 50 for each year of service. The award must be non-cash. Acceptable forms include a physical gift, shares in the employing company, or shares in a company that controls it.
Worked example
Margaret has worked for the same firm for 25 years and has never had a long-service award before. Her employer gives her a non-cash gift to mark the milestone.
- The exempt limit is GBP 50 per year of service: 25 years times GBP 50 equals GBP 1,250.
- If the gift is worth GBP 1,200, the whole amount is tax-free.
- If the gift is worth GBP 1,500, the first GBP 1,250 is exempt and the remaining GBP 250 is a taxable benefit.
- For a basic-rate taxpayer, that GBP 250 excess would cost GBP 50 in Income Tax.
Only the amount above the limit is taxed, unlike the trivial benefits rule where breaching the GBP 50 ceiling taxes the whole gift.
What does not qualify
- Cash payments and cash vouchers, which are always taxable as earnings.
- Awards where service is under 20 years.
- A second award within 10 years of a previous similar award.
- Awards dressed up as long-service gifts but really linked to performance.
How it fits with other tax-free perks
A long-service award sits alongside other small exemptions employees can benefit from, such as trivial benefits up to GBP 50 each and qualifying relocation expenses up to GBP 8,000. None of these is a substitute for the larger reliefs like pension contributions, but together they let an employer pass real value to staff without an Income Tax or National Insurance cost.
Quick recap
- You need at least 20 years of service for the exemption.
- The limit is GBP 50 per year of service, so GBP 1,000 at 20 years.
- The award must be non-cash, not a cash payment or voucher.
- No similar award in the previous 10 years.
- Only the excess above the limit is taxable.
- This is general information, not financial advice. Check the current rules on gov.uk.
To see how a taxable excess would affect your take-home, use the income tax calculator on CalcHub and read the expenses and benefits guidance on gov.uk.
Frequently asked questions
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