There is a tax exemption in Ireland that most employers have heard of but fewer use to its full potential. The Small Benefit Exemption — colloquially known as the Shop Local voucher scheme — allows an employer to give employees non-cash benefits worth up to €1,500 per employee per year, entirely free of income tax, USC, and PRSI for both the employer and the employee.
Budget 2025 and Budget 2026 have progressively improved this exemption, making it more flexible and more generous than at any point since it was introduced. If you are running a business in Dundalk and you are not using this scheme in full, you are leaving money on the table. This is one of the most practical tips in our payroll and employment guides.
What the Small Benefit Exemption Is
The Small Benefit Exemption is a Revenue concession under which qualifying non-cash benefits provided by an employer to an employee are not treated as taxable emoluments. This means:
No PAYE is deducted from the benefit. No employee PRSI applies. No employee USC applies. No employer PRSI applies (which is significant — as I set out in our guide to the true cost of employing someone, employer PRSI on a €1,500 cash payment would cost the employer an additional €165 or so).
The benefit is entirely free of payroll taxes for both parties.
What Changed in Budget 2026
Before Budget 2026, the Small Benefit Exemption allowed up to two qualifying benefits per employee per year, with a maximum combined value of €1,000. Budget 2025 had already improved the scheme.
Budget 2026 increased both the frequency and the value:
The number of qualifying benefits per employee per year increased to five. The maximum total annual value increased to €1,500.
This means an employer can now provide a €300 voucher to each employee on five separate occasions during the year — or any other combination of up to five benefits that totals no more than €1,500. The flexibility is genuinely useful for building a recognition and reward calendar throughout the year.
What Counts as a Qualifying Benefit?
The benefit must be non-cash. Cash payments — even small ones — do not qualify. Transferable vouchers that can be exchanged for cash also do not qualify.
What does qualify includes:
Shopping vouchers — Dundalk Business Improvement District vouchers, One4All cards, Lifestyle vouchers, and similar retail vouchers that are not exchangeable for cash. These are the most commonly used form of the benefit and the origin of the “Shop Local” colloquial name.
Gift cards — for specific retailers, restaurants, or leisure providers, provided they cannot be exchanged for cash.
Hampers, gifts, and other non-cash benefits — within the €1,500 limit per year, any combination of qualifying non-cash benefits works.
Non-cash vouchers for experience-based rewards — spa days, sporting events, concert tickets, restaurant experience vouchers.
The benefit cannot be cash, cannot be a right to receive cash, and cannot be part of a salary sacrifice arrangement where the employee gives up part of their salary in exchange for the benefit.
Who Can Use It?
All employees, including company directors who are also employees (proprietary directors), can receive the Small Benefit Exemption. This makes it available to owner-managed company directors — meaning that a sole director of their own company can give themselves up to €1,500 per year in tax-free vouchers through the company, as I explain in our guide to how directors can pay themselves tax-efficiently.
For a higher-rate taxpayer, €1,500 in tax-free benefits is equivalent to approximately €3,000 in gross salary — the after-tax value of €3,000 in salary, at a marginal rate of approximately 50%, is €1,500. The voucher route delivers the same real value to the employee at half the gross cost to the employer.
The exemption applies per employee per employer. If a person has two separate employments, they can potentially receive the benefit from each employer — though Revenue is clear that each employer must apply the exemption independently.
How to Use It Effectively
The most common approach among Dundalk employers I work with is a Christmas voucher — a €300 voucher provided to all staff in December, timed as an end-of-year recognition. This is straightforward, widely appreciated, and uses one of the five available occasions.
With five occasions now available, a more structured approach is possible:
Occasion 1 (January/February): New Year / recognition of the previous year’s performance. Occasion 2 (March/April): Easter or spring recognition. Occasion 3 (July/August): Mid-year or summer benefit. Occasion 4 (October/November): Pre-Christmas benefit. Occasion 5 (December): Christmas voucher.
This spreads the benefit across the year, creates regular positive touchpoints with employees, and fully utilises the €1,500 annual allowance.
For employees, receiving five separate benefits across the year has a different psychological effect than a single annual payment — more frequent recognition is generally more motivating than an equivalent amount delivered once.
The Accounting Treatment
For the company, vouchers provided under the Small Benefit Exemption are a deductible business expense — they reduce the company’s corporation tax liability. For a company paying 12.5% corporation tax, €1,500 in vouchers per employee reduces the tax bill by €187.50 per employee. This is not dramatic, but it is a legitimate deduction.
There is no payroll processing required for the benefit itself — it does not go through the PAYE system. However, the purchase of the vouchers should be properly recorded in the company’s books as an employee benefits expense, with the invoice or receipts retained.
Do not record the vouchers as a cash payment to employees, as a business entertainment expense, or as a personal drawing. The accounting treatment matters for Revenue audit purposes.
One Limitation Worth Knowing
The Small Benefit Exemption is a genuine and valuable relief, but it has one important limitation: it is capped at €1,500 per employee per year, regardless of the number of occasions or the total value of benefits provided. If you provide a fourth benefit that takes the cumulative total above €1,500, the excess is subject to normal PAYE treatment.
Track the cumulative benefit per employee across the year and ensure you do not inadvertently breach the limit.
Paddy Malone FCA AITI
Paddy is the principal of Malone & Co. Chartered Accountants in Dundalk. A Fellow of Chartered Accountants Ireland and a Chartered Tax Consultant with the Irish Tax Institute, he has been advising businesses across County Louth and the North-East for over 35 years.