Using Gift Cards for Christmas Bonuses: Small Benefits Exemption 2025 Update

As the Christmas season approaches, employers across Ireland are looking for ways to reward their staff for their hard work. While traditional cash bonuses are a popular choice, many companies are turning to gift cards as a tax-efficient way to provide meaningful rewards. With upcoming changes to the Small Benefits Exemption, effective from 1 January 2025, using gift cards as Christmas bonuses is set to become even more attractive for both employers and employees. 

The Small Benefits Exemption allows employers to provide non-cash bonuses to their employees. The benefit is entirely tax-free, meaning neither employees nor employers must pay tax on it, provided it falls within the allowable limits set by Revenue. This can be done in the form of gift cards, event tickets, bill payments, and many other benefits which cannot be converted into cash but have a cash value, making it a tax-efficient way for employers to reward staff.  

From 1 January 2025, the Small Benefits Exemption is set to become even more generous. The key changes include: 

1. Increase in the Maximum Exemption: 

• The tax-free limit for the Small Benefits Exemption will rise from €1,000 to €1,500 per employee per year. 

2. Increase in the Number of Benefits: 

• Employees can now receive up to five non-cash benefits per year, an increase from the previous limit of two. 

Gift cards are an ideal way to take full advantage of the Small Benefits Exemption and offer several advantages for both employers and employees. 

1. Tax Efficiency 
   Gift cards provided under the exemption are completely tax-free. Unlike cash bonuses, which are subject to income tax, PRSI, and USC, gift vouchers maintain their full value. For instance, an employee receiving a €1,500 cash bonus might see a large portion deducted for taxes, whereas a €1,500 gift voucher would be entirely theirs to spend. 
2. Cost Control for Employers 
   Employers benefit from reduced costs, as they do not have to pay employer PRSI on these non-cash benefits. For businesses, this means that a €1,500 card only costs the company €1,500—without the added burden of payroll taxes. 
3. Flexibility and Choice for Employees 
   Gift cards offer employees the flexibility to choose how they spend their bonus, allowing them to treat themselves to something special during the festive season, making the reward feel even more personal. 

To ensure compliance with the Small Benefits Exemption, it’s important to follow the guidelines set by Revenue. Here’s what you need to know: 

• Non-Cash Benefit: The exemption only applies to non-cash bonuses. Cash bonuses will still be subject to tax. The card must not be exchangeable for cash, or it will lose its tax-free status. 
• Up to Five Benefits: From 2025 onwards, you can issue up to five cards per employee per year, if the combined total value does not exceed €1,500. 
• Employer’s Discretion: Employers can choose the value of each benefit but be cautious not to exceed the annual limit in a calendar year as any amount in excess of the limit will be subject to tax. 
• No Part Payments: The benefit must be in the form of a non-cash item (e.g., a card). It cannot be a part-payment of a cash bonus. The entire benefit must be provided as a card or other non-cash benefit to qualify for the exemption. 
• Contractual Bonuses: Discretionary bonuses qualify for the Small Benefit Scheme, contractual remuneration does not. 

Using gift cards or cards as part of your Christmas bonus strategy is simple and can offer real advantages to your business. Here’s how to make the most of the updated Small Benefits Exemption: 

1. Decide on Your Budget: 
   With the 2025 limit increased to €1,500, employers can choose whether to issue one large card, multiple smaller cards throughout the year, or a combination. Christmas presents a prime opportunity to give a larger reward, but with up to five cards allowed annually, you can spread the bonuses across the year for additional milestones. 
2. Select Your Card or Gift Card Provider: 
   There are many card or gift card providers offering multi-retailer cards or store-specific options, such as One4All or AllGo. These types of gift cards give employees the flexibility to spend their bonus at a variety of shops, both in-store and online. 
3. Keep Accurate Records: 
   Ensure you maintain accurate records of the gift cards provided to employees, including dates and values, to ensure compliance with Revenue guidelines 

Christmas is a perfect opportunity to show appreciation for your employees' efforts throughout the year. With the updated Small Benefits Exemption, businesses in Ireland can now offer even greater rewards to their staff, completely tax-free. By using gift cards or gift cards, you not only give your employees a thoughtful and flexible gift, but you also benefit from the tax savings that come with non-cash bonuses. 

At SD Worx Ireland we specialise in managing the complexities of payroll, employee benefits, and tax compliance. Our managed payroll service ensures that your Christmas bonus strategy, including the use of gift cards, is seamlessly executed while adhering to all tax regulations. Let us take care of the compliance details, so you can focus on rewarding your employees with confidence and ease. With SD Worx, you can be assured that your payroll and benefits processes are accurate, efficient, and fully compliant. 

Disclaimer: 

Please note that the changes to the Small Benefits Exemption discussed in this blog—namely the increase in the tax-free limit to €1,500 and the allowance of up to five non-cash benefits per year—come into effect from 1 January 2025. These changes are part of Budget 2025 and do not apply to Christmas bonuses for the year 2024. For Christmas bonuses in 2024, employers must adhere to the existing limits of €1,000 per employee and a maximum of two non-cash benefits within the year.