2025 Year-End Employment Tax & Payroll Roundup

As the year end approaches, employers should try to ensure all 2025 payroll tax matters are closed out and consider requirements for the year ahead. Below we have set out a quick summary of year end employer tax obligations and key items to consider looking ahead to 2026.

Correcting 2025 Payroll - In-Year Payroll Adjustments / Self - correction

Now is an opportune time to review 2025 payroll submissions and ensure that all payments and benefits have been correctly processed and reported to Revenue. Potential items that give rise to adjustments include:

• Company car BIK calculations
• Contractors (note)
• Expat shadow payroll
• Short term business visitors

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A proactive approach can avoid the need for disclosures down the line and can provide comfort, when/if a Revenue intervention is initiated.   In the event that an incorrect payroll submission for 2025 is not corrected before 31 December 2025, employers may still avail of the opportunity to submit a self-correction to adjust 2025 payroll submissions after year end. Any matters identified can be addressed under self-correction without penalty if:

• Revenue is notified within the applicable time limit i.e. before the Corporation tax deadline for the payroll period; and
• A submission including calculation of tax and interest is made, together with accompanying payment.

Off-payroll tax on 2025 benefits - PAYE Settlement Agreement (PSA)

A PSA allows employers to settle income tax, USC, and PRSI on qualifying non-cash taxable benefits outside the payroll system. Typically, a PSA can include items such as:

• Taxis for non-business purposes
• Staff entertainment/lunches
• Gifts/awards for special occasions (e.g. weddings, birthdays, Christmas)

A PSA provides a practical compliance option, allowing employers to cover the tax cost rather than deducting it from employees.

Key dates:

• PSA application deadline: 31 December 2025
• PSA submission & payment deadline: 23 January 2026

Reporting of expenses and vouchers

Employers are required to report certain non-taxable employee benefits to Revenue in real time under the Enhanced Reporting Requirements (ERR). This includes travel and subsistence payments, the remote working daily allowance of €3.20, and vouchers/small benefits provided under the Small Benefit Exemption.  It is important for employers to track all benefits provided to employees and consider whether the small benefit rules apply and if so, to ensure the ERR is correct and up to date e.g. Christmas vouchers provided to employees will need to be reported on or before you give them to your employees.  

PRSI classes and rates

PRSI rates should be reviewed in advance of year end. The rate of Employee and Employer PRSI increased by 0.1% from 1 October 2025. PRSI classes should also be reviewed. For example, for employees that reach age 66 during 2025, the PRSI Class may need to be switched from Class A to Class J.

Looking forward to 2026

BIK – Company Vehicles

Employers will need to be familiar with the updated company car BIK rules and ensure any relevant changes are reflected in their payroll for 2026.

In summary, from 1 January 2026, Ireland will introduce updated Benefit-in-Kind (BIK) rules for company cars, with a focus on encouraging the use of electric vehicles (EVs). A new Category A1 will apply to zero-emission vehicles, offering reduced BIK rates ranging from 6% to 15%, depending on annual business mileage. Additionally, the temporary €10,000 reduction to the Original Market Value (OMV) of cars (A1 – D category) and vans will remain in place for 2026.  The additional OMV reduction for fully electric vehicles will be €20,000 for the year 2026 (previously €35,000 in 2025). The highest mileage band threshold will also be maintained at 48,001km.

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Auto-Enrolment

Ireland’s Auto-Enrolment Pension Scheme will launch on 1 January 2026, automatically enrolling employees aged 23 to 60 earning €20,000 or more annually who are not currently paying into a work or private pension through payroll.  Contributions will be made by the employee, employer, and the State, starting at 1.5% each for employees and employers, with a 0.5% State top-up, gradually increasing over 10 years to a combined 14%. There is an €80,000 gross pay threshold for contributions.  Once an employee has reached the €80,000 gross pay threshold each year, they will cease to make contributions on earnings after the pay period in which the threshold is exceeded.

Employer Reporting

Special Assignee Relief Programme (SARP)

Employers with employees who availed of SARP during 2025 must file the SARP Employer Annual Return with Revenue by 30 June 2026.

Key points:

• The return must be submitted via the eSARP portal on Revenue Online Service (ROS).
• Late or incomplete filings may result in loss of SARP relief for affected employees.
• From 2026, the filing deadline will move to 30 June following the tax year, and the minimum qualifying salary will increase to €125,000 for new arrivals.

Employer Share Scheme Reporting (SSR) Obligations

Employers operating share schemes must file annual returns with Revenue by 31 March 2026 for activity during the 2025 tax year.

Important notes:

• Employers must be registered for share scheme reporting via ROS;
• Payroll withholding obligations apply to all share awards and gains on options exercised; and
• Failure to file may result in penalties or Revenue compliance interventions.

Quick Actions for 2026

• Ensure any pay element changes (e.g. salary increases), are updated on the payroll software and ensure the software is updated for 2026 Budget changes;
• Apply 2026 Revenue Payroll Notifications (RPN);
• Track cases where employees received benefits but had insufficient net pay to cover the tax. Any outstanding balance must be collected or treated as a taxable benefit by 28 February 2026;
• Consider if a PSA application should be made by 31 December 2025 with calculations and tax payment to follow by 23 January 2026;
• Set a reminder for any Share Scheme Reporting and SARP employer filing obligations for that need to be made;
• Consider a self-review of 2025 payroll matters;
• Ensure all PAYE exclusion order extension applications are made, where relevant;
• Ensure all Social Security (A1 Certificate / Certificate of Coverage), extensions are in place, where relevant.

How Grant Thornton Can Help

Grant Thornton can:

• Conduct a health check to determine any self-correction matters 
• Assist with PSA application, calculations, and submission to Revenue
• Provide ERR compliance services
• Advise on tax-efficient use of staff incentives and benefits 
• Assist on the tax aspects associated with globally mobile employees e.g. SARP applications and calculations, shadow payroll etc.
• Assist with share scheme reporting obligations 

Conclusion

The lead-up to Christmas and the year end is a demanding time for payroll and HR teams. Taking action now can help ensures you remain compliant with payroll tax requirements.