Budget 2023: Christmas comes early for workers as employers can offer tax-free vouchers

It could be a very happy Christmas indeed for some Irish workers, after the Government used Budget 2023 to increase the amount employers are allowed to gift tax free to their staff.

Under current rules, a worker can receive a tax-free bonus of up to €500 a year in vouchers thanks to the small benefit exemption.

However, in Budget 2023, the Government doubled this annual limit to €1,000, effective straight away.

And to take the sting out of matters for employers seeking to reward workers in lieu of a pay rise as the cost-of-living crisis bites, they can do this in two tranches, rather than having to give it all at once.

Due to the law change, employees who receive such benefits from their companies before Christmas may be in position to receive two doses of holiday cheer this year.

Naturally, all of this depends on how generous the employer is feeling, but it is one of many additional initiatives that employees are likely to like.

Tax reductions totaling €1.1 billion for the State's 2.5 million taxpayers are included in Budget 2023.

In contrast, the threshold at which employees begin paying the higher 40 percent rate of tax is rising by €3,200 to €40,000, with proportionate increases for married couples and civil partners. Renters will be able to claim a €500 annual exemption.

The three primary tax credits—personal, employee, and earned income—are also increasing by €75.

The tax reforms will save single persons about €800 year and couples €1,600 annually. The improvements to the tax credit allow workers to earn an additional €150 before paying taxes. The income tax reforms result in an increase of €1,600 annually for a couple making €80,000.

In addition, the national minimum wage increased by 80 cents an hour, which resulted in an increase in the second USC rate band (2pc rate) from €21,295 to €22,920. As a result, minimum wage workers will continue to be exempt from the highest USC rates.