Money Matters

Small Benefit Exemption Scheme Ireland: rules, limits and how to use it in your business

The Small Benefit Exemption Scheme allows employers in Ireland to give employees up to €1,500 per year in tax-free non-cash rewards. Here’s how it works and how to use it in your business.

10 June, 20269 min read Share

Key takeaways

• The scheme allows tax-free employee rewards. The Small Benefit Exemption Scheme enables employers to give non-cash gifts or vouchers to employees without triggering PAYE, USC or PRSI—making rewards more valuable than cash bonuses.
• Higher limits and more flexibility from January 2025. Employers can provide up to €1,500 per employee per year, split across up to five separate rewards, giving greater flexibility in how and when employees are recognised.
• Strict rules determine eligibility. To qualify for the exemption, rewards must be non-cash, must not exceed the annual limit, and must be provided at the employer’s discretion—not as part of salary, bonuses, or contractual entitlements.
• A cost-effective way to boost retention and morale. The scheme offers a tax-efficient way for businesses to reward performance, support employee wellbeing, and improve engagement without increasing payroll tax costs.

The Small Benefit Exemption Scheme allows you to reward employees with tax-free non-cash benefits of up to €1,500 per year.

This makes it a more efficient alternative to cash bonuses.

Cash bonuses are subject to PAYE income tax, Universal Social Charge (USC) and Pay Related Social Insurance (PRSI), which reduces the amount employees receive.

The scheme avoids these deductions when used correctly.

If you’re looking for a way to recognise your team’s contribution, here’s how the scheme works and how to apply it in your business.

Here’s what we’ll cover:

What is the Small Benefit Exemption Scheme?

The Small Benefit Exemption Scheme is an Irish tax relief that allows employers to give employees non-cash benefits—such as vouchers or gifts—without paying PAYE, USC or PRSI, up to an annual limit.

It was introduced in 2004 and has been updated several times, most recently in Budget 2025.

However, as part of Budget 2025, the Irish government expanded the Small Benefit Exemption Scheme.

These rules remain in place for 2026:

• The benefit must be non-cash and must not be redeemable, in full or in part, for cash.
• A maximum of five benefits, up to €1,500, can qualify for the exemption each year. If more than five benefits are provided, only the first five qualify for tax-free treatment.
• Where the gift or voucher exceeds €1,500, the full value is subject to PAYE, USC and PRSI.
• The benefit must not form part of a salary sacrifice arrangement and must be provided in addition to normal pay.
• The employer must buy the voucher. So, for instance, an employee can’t purchase it with the intention of being reimbursed.

To qualify:

• Benefits must not be redeemable for cash
• They must not be part of salary or a salary sacrifice arrangement
• The exemption applies per employee

Reporting requirements

Employers must report the date and value of each benefit to Revenue under Enhanced Reporting Requirements, on or before the date the benefit is provided.

Unused allowance cannot be carried forward into the next tax year.

Flexibility for employers

Niall Donnelly, Tax Director at UHY Farrelly Dawe White Limited, describes the scheme as “a simple but excellent way to reward employees tax-efficiently”.

You don’t have to give the full benefit of €1,500 available.

Small business owners may be unable to afford to give each employee €1,000 and prefer to gift a lesser amount.

Employers can choose any amount up to the €1,500 annual limit, depending on their budget.

How much can employers save by using the scheme?

Employers can make considerable savings by using the exemption to reward their employees.

According to gift voucher company One4All, if you were to put a bonus of €1,000 through payroll for an employee who’s on the higher tax band and pays PRSI and tax, it would cost your business €2,313.54.

By using the exemption, you can make potential savings of up to approximately €1,320.54 per employee (due to employers’ PRSI increasing by 0.1% on 1 October 2024) compared to putting it through payroll.

How employees can benefit from the scheme

Any employee on your company’s payroll – both part time and full time – who pays PAYE income tax, PRSI and USC can benefit from the scheme. How much they save in taxes depends on the tax rate they’re on and what level of USC and PRSI they pay.

Your employee receives the full value of the bonus, which they can use as they wish.

Niall comments that the number of employees who can benefit from the scheme is unlimited.

How to use the Small Benefit Exemption Scheme in your business

Decide the value of the benefit

Start by setting how much you want to give each employee, based on your budget and reward strategy.

You can provide any amount up to €1,500 per year per employee, either as a single benefit or split across multiple rewards.

Consider when rewards will have the most impact—for example, at year-end, during busy periods, or to recognise individual achievements.

Planning ahead helps you stay within the annual limit while making the benefit meaningful.

Choose a qualifying non-cash reward

Select a benefit that meets Revenue rules and will be valued by your employees.

This is typically in the form of gift cards or vouchers but can also include tangible items such as goods or experiences.

To qualify for the exemption, the benefit must:

• Be non-cash
• Be used only to purchase goods or services
• Not be redeemable, in full or in part, for cash

In practice, many employers use widely accepted voucher schemes so employees have flexibility in how they spend the reward.

Ensure compliance with annual limits

Before issuing any benefit, check that you remain within the scheme’s limits.

For 2026, this means:

• A maximum of €1,500 per employee per year
• Up to five qualifying benefits in total

You should also track the cumulative value of benefits throughout the year.

If the total exceeds €1,500, or if more than five benefits are provided, the exemption no longer applies and the benefit becomes fully taxable.

Record and report the benefit

Each benefit must be recorded correctly and reported to Revenue.

Under Enhanced Reporting Requirements, employers must report:

• The date the benefit was provided
• The value of the benefit

This information must be reported to Revenue on or before the date the benefit is provided.

While the benefit is not subject to payroll taxes, reporting is completed through Revenue systems linked to payroll.

Accurate reporting is essential to remain compliant and avoid issues during audits.

Track benefits across the year

Maintain a simple record of all benefits provided to each employee.

This allows you to:

• Monitor how much of the €1,500 allowance has been used
• Ensure you do not exceed the five-benefit limit
• Plan future rewards effectively

It’s also important to remember that any unused allowance cannot be carried forward to the next tax year, so timing your benefits appropriately can help maximise the value of the scheme.

What types of benefits qualify under the Small Benefit Exemption Scheme?

The important thing to remember is that the benefit can’t be paid in cash. Examples of benefits that can be given include:

• Gift cards
• Vouchers for department stores
• Vouchers for grocery stores
• Tangible gifts (such as jewellery, homeware and electrical goods)
• Gym memberships
• Spa treatments
• Concert tickets.

Allan Pryal, formerly of Expert Payroll, says gift vouchers and store gift cards are among the most popular ways that employers are rewarding their employees.

He notes that employers are free to implement the scheme as they wish, provided they follow the rules.

Some companies that promote the Small Benefit Exemption Scheme include One4All, which has thousands of online and national participating outlets, and Allgo reward card, which offers an employee incentive points system for companies.

An alternative option is to offer tangible gifts as a way to reward employees.

Dr Paul Gadie, managing director at Gift Innovations, promotes the Small Benefit Exemption Scheme, and welcomes the fact that it allows companies to give up to 5 benefits per year, which can be a mix of tangible gifts and vouchers.

He adds: “This presents an extra opportunity to thank and reward employees.”

Niall says tax-free vouchers, tickets or benefits can be used only to purchase goods or services and can’t be redeemed for cash.

He reminds employers not to exceed the maximum amount allowable under the scheme.

Reporting requirements

Employers must report the date and value of each benefit to Revenue under Enhanced Reporting Requirements.

Unused allowance cannot be carried forward into the next tax year.

This reporting must be completed in real time through payroll submissions.

Final thoughts on the Small Benefit Exemption Scheme

The Small Benefit Exemption Scheme is a great way to show your appreciation for your employees. You can use it to give your staff an end of year bonus or a Christmas gift.

To sum up, here are a few points to note:

• The benefit must be non-cash and must not be redeemable, in full or in part, for cash.
• A maximum of five benefits, up to €1,500, can qualify for the exemption each year. If more than five benefits are provided, only the first five qualify for tax-free treatment.
• Where the gift or voucher exceeds €1,500, the full value is subject to PAYE, USC and PRSI.
• The benefit must not form part of a salary sacrifice arrangement and must be provided in addition to normal pay.
• The employer must buy the voucher. So, for instance, an employee can’t purchase it with the intention of being reimbursed.

Whatever way you avail of the exemption, the small benefit relief offers considerable savings for you and your employees.

Editor’s note: This article was first published in November 2019 and has been updated for relevance.

Frequently asked questions on the Small Benefit Exemption Scheme

Browse more topics from this article

• Employee benefits
• Payroll