Questions and Answers
What is the Small Benefit Exemption?
I run a business with 12 employees. Can I use the Small Benefit Exemption to pay them a Christmas Bonus?
By Tadhg MoriartyAs we head toward the festive season, the small benefit exemption is back on the agenda for many employers and indeed their employees.
The attraction of these small benefits is that, subject to certain conditions, they can be provided to employee’s tax free, whilst at the same time being a deductible expense for the employer.
Tax Free Bonus
Under the Small Benefit Exemption businesses can give employees up to €1,000 a year completely tax-free, however there is no obligation to give the full amount.
To pay an employee a bonus of €1,000 through payroll, it would cost an employer €2,082 (For an employee who is earning €45,000 to receive a final net bonus of €1,000, an employer would need to pay approximately €1,875 gross, plus incur an additional cost of €207.17 based on 11.05% Employers PRSI.)
However, under the Small Benefit Exemption Scheme businesses can give employees, including directors, up to €1,000 a year completely tax-free.
How can I pay the bonus?
This bonus must be in the form of a voucher which can only be redeemed in exchange for goods and services. The benefits must not be in the form of cash, nor can it be redeemed for cash e.g., pre-paid cards enabling cash withdrawals are not allowable.
Employers can give two vouchers in a year. If more than two benefits are given in a year, only the first two may qualify for the tax-free status.
The employer must buy the voucher, an employee can’t purchase it and be reimbursed.
The most widely known method of availing of this scheme is through the One4all Gift Cards.
Can directors benefit from the small benefit exemption?
Directors who avail of this scheme must be on the company's payroll to qualify. Read more about directors and the Small Benefit Scheme here
Reporting payments made under the Small Benefit Exemption Scheme
The benefit must be detailed under Revenue’s Enhanced Reporting Requirements in real time i.e., on or before the date of payment.
Budget 2025
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 and the number of vouchers that can be given in a year is increasing from 2 to 5. These changes are effective from 1 January 2025.
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Or contact usFrequently 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 15 Dec 2021 | Last updated 28 Nov 2024
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.
Tadhg Moriarty
Tadhg Moriarty is a highly skilled Chartered Accountant, Chartered Tax Consultant and Chartered Tax Advisor with over 15 years of experience. Tadhg has worked with private clients and family run enterprises and has a deep understanding of the unique challenges faced by these businesses. He is committed to helping his clients optimise their tax positions and improve their financial performance.
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