2025 Year-End Employment Tax Considerations

Payroll Corrections

I. In-year correction

As year-end approaches, employers should review their year-to-date payroll submissions to identify any necessary adjustments to employees’ pay or benefits. Key areas and potential items that may require adjustments include:

• BIK valuations
• Short-term business visitors from abroad
• Contractor personnel
• Expat shadow payroll

While this list is not exhaustive, it highlights areas that warrant attention.

II. Post year-end correction

In the event an incorrect or incomplete payroll submission for 2025 is not corrected by 31 December 2025, employers can still submit a self-correction after year-end, provided certain conditions are met. Under Revenue’s Code of Practice for Compliance Interventions, self-correction without penalty requires:

• Advance written notification to Revenue within the applicable time limit (e.g., before the Corporation Tax deadline for the relevant payroll period)
• A supporting calculation outlining the correct tax and interest due
• Payment of any additional tax, USC, PRSI, and applicable interest with the correction

The deadline for filing a self-correction is 9 months from the end of the accounting period within which the payroll period ends i.e. 23 September 2026 for employers with a 31 December 2025 financial year-end, where they pay and file online through the Revenue Online System (ROS). 

The self-correction process provides employers with a valuable opportunity to review and rectify payroll errors or omissions from the prior year without incurring penalties.

PAYE Settlements Agreements (PSA) 

A PSA enables employers to make a single annual payment of PAYE, USC, and PRSI to Revenue on minor and irregular non-cash benefits provided to employees, allowing employers to cover the associated tax liabilities without passing the cost on to employees and without the need to amend payroll submissions. 

Advance approval from Revenue is required, before the end of the tax year in question, before filing a PSA. The deadline for submitting the PSA return and paying the related taxes is 23 January following the year-end. For example, PSA applications for 2025 must be submitted by 31 December 2025, with the filing and payment due by 23 January 2026.  Revenue recently clarified the gross up methodology to be applied in PSAs. 

As a result, employers may now claim refunds for any overpaid income tax, USC, and PRSI on PSAs for tax years 2021 to 2024. It is important to note refund claims for the 2021 tax year must be submitted to Revenue before 31 December 2025, after which time repayments will be statute barred and therefore no longer refundable. 

Small Benefit Exemption 

Employers may consider using the small benefit exemption, which allows them to provide up to five tangible non-cash benefits to employees in a tax year, provided the total value does not exceed €1,500. This exemption is particularly relevant as the Christmas season approaches.

Employers who have already provided non-cash benefits this year should carefully monitor both the number and total value of any additional benefits planned to be provided to employees before year-end to ensure compliance with the five-benefit limit and the €1,500 annual threshold. It is only the first five benefits per employee per year that qualify for the exemption. 

Enhanced Reporting Requirements

Enhanced Reporting Requirements (ERR) are expected to be a key focus area for Revenue in 2026, with Revenue indicating that compliance since the introduction of the new reporting from 1 January 2024 will play a significant role in their risk assessments and subsequent enforcement activities in 2026. In particular, Revenue is likely to scrutinise the data submitted through the ERR returns filed in 2024 and 2025 to identify and target high-risk areas for PAYE compliance interventions.

Employers who have not yet filed ERR returns, or are only partially compliant, should take corrective action before the end of 2025.

Contractors

In an ever-changing landscape, the treatment of contractors continues to attract attention. New guidance was published by Revenue in September 2025 introducing a settlement scheme for contractor arrangements for the 2024 and 2025 tax years, allowing eligible employers to disclose and settle income tax, USC, and PRSI liabilities without incurring penalties or interest. 

If this is relevant to your business, now is an opportune time to consider the settlement scheme proposed by Revenue, as the deadline for submitting related disclosures is 30 January 2026.

Benefits in kind (BIK)

The correct value of BIK items should be processed via payroll in real-time. In practice, Revenue recognise that this is not always possible and so they encourage employers to review BIK items periodically (usually quarterly) with corrective adjustments to be made in the next payroll run.

If such a review has not been undertaken thus far this year, now is a good time. Adjustments can be made to 2024 payroll submissions prior to year-end with no notification to Revenue required. See above for more information on in-year payroll adjustments.

Particular care should be given to:

• Company vehicles: the valuation of company car BIK is dependent on business mileage logs being obtained from employees.  Regular reviews should be undertaken to ensure the correct BIK rates are applied in payroll.
• Share option gains / share awards: if employees exercise share options or have RSU vests in December 2025 but after the December payroll cut-toff date, there will be an obligation on employers to report the share gains via payroll before 31 December 2025. The December payroll submission can be amended up to 14 January 2026 or employers may also wish to consider a bonus run for December. 

The exercise of share options will have to be reported on the employer’s RSS1 return for 2025. The vest of RSUs will have to be reported by the employer on the Employer Share Awards (ESA) return for 2025. Both the RSS1 and the ESA are due to be filed by 31 March 2026 and should align to the payroll records.

Employer Provided Meals

Recent guidance from Revenue, effective from 1 October 2025, introduced significant changes to the taxation of employer provided meals, which are consumed on the employer’s premises.  

As with all expenses, employers must retain adequate supporting documentation to substantiate these tax-free claims. 

PRSI Classes & Rates

Regular reviews of PRSI Classes are always recommended as year-end approaches. For example, if an employee reached the age of 66 during the year, the class should switch from Class A to Class J. A review now means that adjustments can be processed via payroll, thereby avoiding PRSI reclaims which can be time-consuming.

Also of note is the increase of 0.1% in the rate of Employee and Employer PRSI from 1 October 2025 which brings the Employee PRSI rate to 4.2% and the Employer PRSI rate to 11.25%.

Employee Pension Contributions

Employees can make additional voluntary contributions (AVCs) post year-end which they can claim tax relief for via their personal tax return. Alternatively, they can increase their regular contribution levels and receive the tax relief through payroll. This needs to be done before the December payroll cut-off, which is generally earlier than a normal month cut-off. Employers should ensure their payroll systems include appropriate checks to monitor pension contribution limits and apply tax relief correctly.

Split Year Treatment 

If an employee arrived in or left Ireland during 2025, consideration should be given to agreeing with Revenue that pre-arrival or post-departure employment income is outside the scope of Irish tax. Whilst a claim for split year relief can be made via the Personal Tax Return, it is recommended the claim is made in the tax year to avoid any potential issues with late filing or an unforeseen change in circumstance. 

Preparation for 2026 payroll processes 

Before commencing 2026 payroll, there are some additional updates and administrative tasks that need to be considered, including: 

• Pension Auto Enrolment
  The new Auto-Enrolment retirement savings scheme will come into effect on 1 January 2026. Under this scheme, eligible employees will be automatically enrolled. Employers must prepare by communicating the scheme’s operational details to staff, establishing robust management processes, and budgeting for the increased costs associated with employer contributions and scheme administration. Non-compliance may result in penalties or prosecution.
• Company vehicles
  There were some changes to the BIK calculation rules for company vehicles announced in Budget 2026 – mainly retaining the €10,000 universal relief and introducing a new category of vehicle. Further information is available here.
• PAYE Exemptions
  Employers that sent any employees to work abroad during the year, such that the employee will break Irish tax residence and will only be undertaking minimal or incidental duties in Ireland, should consider applying for a PAYE exclusion order to enable PAYE/USC to be refunded via payroll rather than via the tax return process.
  
  If you have had business travellers into Ireland during the year, you should consider whether a PAYE dispensation is required for any of the travellers. Applications for dispensation should be made within 30 days of the individual taking up duties in Ireland. Employers should also review any dispensations obtained during the year to ensure that the individual’s did not exceed their expected working time in Ireland.
• USC bands
  The ceiling of the 2% rate of Universal Social Charge (USC) is being increased by €1,318 to €28,700. While this should automatically be considered in your payroll software updates, it’s important to verify this is the case.

Conclusion

The lead-up to year-end is often an exceptionally busy time for payroll teams, presenting a range of challenges for employers striving to maintain compliance. Deloitte’s team of specialists are here to help you navigate these complexities. With our extensive expertise, we assist employers in managing risks effectively and staying ahead of the constantly evolving employment tax landscape. 

Please feel free to reach out if you would like to discuss how we can assist your team.