Insights
There is a significant increase in the Small Benefit Exemption Scheme in 2025. These changes make the scheme more advantageous for employers in Ireland to reward their employees in a tax-efficient way. From 1st January 2025, businesses will have greater flexibility in how they can provide tax-free benefits. This is excellent news for both employers and employees. As a trusted provider of taxation services, we help businesses stay informed and compliant with these updates. In this article, we will explore the details of the updated scheme, its requirements, and how businesses can take advantage of it.
What is the Small Benefit Exemption Scheme?
The small benefit exemption scheme allows a business to give employees non-cash benefits, such as vouchers or gift cards. These benefits are not subject to tax deductions like PAYE, PRSI, or USC. Originally, the scheme only allowed one tax-free benefit of up to €500 per employee each year.
However, new limits were introduced to the Small Benefit Exemption Scheme in 2025. These changes significantly increase the value and frequency of these benefits. The exemption helps businesses boost morale while avoiding extra tax liabilities.
What are the 2025 Updates?
From 1st January 2025, employers can now provide:
- Up to five non-cash benefits per employee each year, tax-free.
- A combined value of up to €1,500 across the five benefits.
It is important to note that:
- Any benefits exceeding €1,500 in total value will be fully taxed.
- Only the first five benefits given within the year qualify for the tax exemption. Additional benefits, even if the combined total is less than €1,500, will not qualify.
- The benefits cannot be in cash, and unused allowance amounts cannot be carried over to the following year.
These updates make the scheme more flexible. They allow businesses to reward employees multiple times a year while staying tax compliant. To learn more about the small benefit exemption, visit the Revenue website.
How Does the Scheme Work?
To use the Small Benefit Exemption Scheme Increase in 2025, employers must adhere to specific rules:
- Non-Cash Benefits Only: The benefit must take the form of a gift card, voucher, or similar non-cash reward. Cash is not allowed.
- €1,500 Annual Cap: The total value of the benefits across the year cannot exceed €1,500.
- Maximum of Five Benefits: Only the first five benefits provided to an employee each year qualify for the exemption.
- No Salary Sacrifice: The benefit cannot replace regular pay or be deducted from the employee’s salary.
These updated small benefit exemption rules ensure the scheme remains fair. They also provide increased value for employers and employees alike.
Why is This Update Important?
The 2025 Small Benefit Exemption Scheme rewards employees more often and with greater value. This can improve employee engagement, motivation, and retention—all while reducing tax liabilities. For small businesses, this exemption is particularly beneficial. It allows for meaningful rewards without stretching budgets.
Reporting Obligations
Employers must report the date and value of each benefit to Revenue. For detailed guidance, see Revenue’s Enhanced Reporting Requirements.
If you need guidance on implementing the updated scheme, our expert taxation services team are here to help. Contact us today to learn more or visit our website to see how we can support your business.