Questions and Answers
What is the Small Benefit Exemption Scheme?
I run a business with 12 employees. Can I use the Small Benefit Exemption Scheme to pay them a Christmas Bonus?
A great way for businesses to pay a bonus at Christmas is through the Small Benefit Exemption Scheme.
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. It is not immediately apparent as to whether this new amount of €1,500 will come into effect before the end of 2024. We will update our website when further information on this is available.
Tax Free Bonus
To pay an employee a bonus of €1000 through payroll, it would cost an employer €2,082 (For an employee who is earning €45,000 to receive a final net bonus of €1000, 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 €1000 a year completely tax-free.
Changes to the Small Benefit Exemption Scheme
Previously the total amount an employer could give tax-free under the Small Benefit Exemption Scheme was €500. Budget 2023 announced that this limit has increased to €1000, however there is no obligation to give the full amount.
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 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.
The most widely known method of availing of this scheme is through the One4all Gift Cards.
Reporting payments made under the Small Benefit Exemption Scheme
If you plan to give staff any vouchers after 01 January 2024 you will be required to report the details to Revenue through Enhanced Reporting Requirements (ERR). Read more about ERR here.
Frequently Asked Questions
Under the Small Benefit Scheme businesses can give employees up to €1000 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. It is not immediately apparent as to whether this new amount of €1,500 will come into effect before the end of 2024. More to follow.
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 2 Oct 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.
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