Tax-Free Vouchers: A Smart Way to Reward Employees This Holiday Season

December 2, 2024
|In Taxation
|By Angela O'Leary

As the holiday season approaches, many employers look for meaningful ways to reward their employees. Tax-free vouchers are one such opportunity, offering both financial and tax-saving benefits for employers and employees. Here’s everything you need to know about this attractive incentive.

What Are Tax-Free Vouchers?

Employers can provide employees with a voucher or pre-paid credit card valued up to €1,000, and the best part is that this amount is completely tax-free for the employee. This means:

  • No Benefit in Kind (BIK): Employees don’t pay tax on the voucher.
  • No Employer’s PRSI: Employers save an additional 11.15% on PRSI, making it a cost-effective alternative to salary payments.

Key Details for 2024

  • €1,000 Limit in 2024: The tax-free voucher limit for this year is capped at €1,000.
  • Increase in 2025: Starting January 1, 2025, this amount will increase to €1,500.

Directors and Spouses Can Benefit Too

Business owners and directors can also take advantage of tax-free vouchers. If your spouse is listed as the second director of your company, they may also qualify—provided they meet the definition of an employee.

Requirements for Eligibility:

  • The individual must be classified as an employee.
  • Part of the employee definition includes receiving a salary.

How to Make Your Spouse Eligible:

If your spouse is not currently receiving a salary, you can pay them €1,000 in director’s fees through December’s payroll. This payment classifies them as an employee, making them eligible to receive a €1,000 tax-free voucher.

Double the Benefit

As the director, you can purchase a tax-free voucher for yourself, and if your spouse qualifies as an employee, they too can receive one. This strategy not only shows appreciation for their contributions but also maximizes the benefit for your household.

A Thoughtful and Tax-Efficient Gift

Offering tax-free vouchers during the festive season is a thoughtful way to reward employees while optimizing your business’s financial strategy. Remember to act now and take advantage of the €1,000 limit before the end of the year, and prepare for the higher cap of €1,500 starting in 2025.

For guidance on implementing tax-free vouchers or optimizing employee benefits, reach out to Angela at info@agassociates.ie. Let AG Associates help you make the most of this tax-efficient opportunity.