Questions and Answers
What are the changes to the Small Benefit Exemption Scheme?
I run a small business with 12 employees. I heard there were come changes in Budget 2023 to the Small Benefit Exemption Scheme. Will this affect me?
Under the Small Benefit Exemption Scheme businesses have the option to give employees, including directors, a voucher completely tax-free.
Previously the total amount an employer could give was €500. Budget 2023 announced that this limit has increased to €1000.
This bonus must be in the form of a voucher which can only be redeemed in exchange for goods and services i.e. it cannot be exchanged for cash. Previously an employer could only give 1 voucher in a year, but this has now been changed that 2 vouchers can be given in a year.
This increase has been signed in to law which gives employers the scope to offer employees up to €1,000 in vouchers tax free via the Small Benefit Exemption Scheme this Christmas.
This scheme is a great way for small businesses to pay a bonus due to the tax savings for both the employer and the employee. For an employee who is earning €42,500 to receive a final net bonus of €1,000 through payroll, an employer would need to pay €1,400 gross, plus incur an additional cost of €154.70 based on 11.05% Employers PRSI.
Frequently Asked Questions
Under the Small Benefit Exemption businesses can give employees up to €1,000 a year completely tax-free.
In Budget 2025 it was announced that the amount that can be given tax free under the Small Benefit Scheme will be increased to €1,500. This change is effective from 1 January 2025.
No, this benefit must be in the form of a voucher which can only be redeemed in exchange for goods and services.
The key thing to work out is whether as a company director you are considered an employee as the legislation behind the scheme states that the voucher must be “given to an employee by his or her employer. More here
Yes, as long as they are in receipt of “Schedule E” income from their company on which income tax, PRSI and USC is being deducted.
No, because sole traders do not receive Schedule E income from their businesses. Employees of sole traders can avail of the scheme, however.
Date published 28 Sep 2022 | Last updated 13 Dec 2022
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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