With an overall package of €10.5 billion, Budget 2025 has been framed as helping to accommodate higher capital spending and additional public services against the backdrop of a higher population. What does that mean in practical terms?
Of the €10.5 billion Budget 2025 package:
- €1.6 billion relates to income tax measures
- €6.9 billion relates to expenditure measures
- €2.2 billion relates to once-off cost of living measures
In our infographic and article below, we’ve summarised some key takeaways, including how the changes in tax rate bands and personal tax credits can add up to €1,109 of tax savings.
Key takeaways
For a full written overview of the key takeaways, scroll down or click here.
“Today’s Budget is my first and it is also unique in the opportunity it presents to plan, transform and deliver for the future. We want our country to be an attractive place to live in, work in, raise a family and create jobs and opportunity – a foundation of real progress for the future.”
Jack Chambers, Minister for Finance, 1st October 2024
PERSONAL TAX
The focus of the personal income tax package in this Budget has been framed as being to support low and middle income earners, by building on increases to tax credits and USC reductions in previous Budgets.
In Budget 2025, there continue to be further changes in the 20% tax rate bands, personal, employee and earned income tax credits, and the small change to the USC rate band, which in total can add up to €1,109 of tax savings.
This amount of €1,109 will apply to those who pay tax at the higher 40% rate and earn €70,044 per year. By comparison, someone earning €44,000 will see a tax saving of €849.
This can increase if you are entitled to further tax credits in addition to the standard credits of Personal Tax Credit, Employee Tax Credit and Earned Income Tax Credit; for example the rent tax credit or caring-related credits (see below).
A single person earning €20,000 or less in 2025 will now be outside of the income tax net.
Tax Credits
There is a €125 tax credit increase for the Personal Tax Credit, Employee Tax Credit and Earned Income Tax Credit, meaning these tax credits will become worth €2,000 in 2025.
20% Tax Rate Band
The 20% income tax rate band (known as the “standard rate band”) is increasing by €2,000. This will allow you to earn up to €2,000 more which is taxed at the lower 20% tax rate instead of the 40% tax rate. The higher 40% tax rate now applies at earnings of €44,000 and above.
Carer Related Tax Credits
Additionally, there are increases of €150 in the Home Carer Tax Credit and the Single Person Child Carer Credit. The Incapacitated Child Tax Credit will be increased by €300.
USC
A large tranche of the budget’s tax policy is a 1% reduction in the Universal Social Charge between income of €27,382 and €70,044 and a widening of bands.
The 4% rate of USC will be reduced to 3%.
The 2% USC rate band will be increased slightly, allowing you to earn an additional €1,622 at the 2% rate before moving into the next higher rate.
SMALL BENEFIT EXEMPTION SCHEME
The Small Benefit Exemption allows Company Directors and employees to receive a non-cash bonus on a completely tax-free basis each year from their employer company. As the payment must be in a non-cash form, the most common way to avail of this scheme is by purchasing gift vouchers.
The annual limit on this tax-free amount is being increased in Budget 2025 from €1,000 to €1,500. An additional significant change to the scheme also permits this to be claimed over another up to five separate installments throughout the year.
This change is said to allow greater flexibility for employers in giving tax-free rewards to their employees for different reasons throughout the year.
RENTERS, HOMEOWNERS & LANDLORDS
Tax Credit for Renters
The tax credit for renters, and parents who pay for their student children’s rental accomodation in the case of Rent A Room accommodation or “digs, is being increased from €750 to €1,000 for 2024 and 2025.
Help-To-Buy Scheme
The Help-to-Buy scheme will be extended until the end of 2029.
Landlords
An extension to the pre-letting expenses relief for landlords is being extended for 3 years to 2027.
Homeowners
The temporary Mortgage Interest Tax Relief is introduced in 2024 for certain homeowners is being extended for one further year. This relates to those who had a mortgage balance of between €80,000 and €500,000 at 31 December 2022.
Tax relief will be available for one further year in relation to the increased interest paid on the mortgage in the calendar year 2024 as compared with the amount paid in 2022, at the standard rate of 20% income tax. The relief was capped at €1,250 per property.
Energy Costs for Households
Further support is being provided for households with increased energy costs again this year, in the form of a total of €250. This will be paid in two equal payments, one before the end of the year and one after.
ENTREPRENEURS & INVESTORS
Extension of Company Start-Up Relief to Owner-Managers
The Government also expanded the Company Start Up Relief from corporation tax exemption to small owner-managed companies by extending the qualifying criteria to now include Class S PRSI. This will mean that start-up companies will no longer need to have additional employees beyond the owner-manager/s in order to qualify for the corporation tax exemption. More details are to be provided in next week’s Finance Bill.
Research & Development (R&D) Tax Credit
There will be an increase of the first year payment threshold of the R&D Tax Credit from €50,000 to €75,000 to support improved cash flow for businesses claiming the R&D tax credit.
Reduced CGT for Angel Investors
The angel investor relief introduced in 2023 which reduces the rate of CGT applicable to gains, was enhanced today with a new lifetime limit of €10m, increased from €3m. This is another step by the Government in trying to encourage an investment ecosystem in Ireland.
INDIRECT TAXES
Cigarettes
Efforts to discourage smokers continue, with excise duty on cigarettes rising again – up €1 on a packet of 20 cigarettes, with a pro-rata increase from other tobacco products.
Vapes
A new tax is being introduced on vapes, by applying a tax of 50c per ml of eliquid. This will come into affect by the middle of 2025.
VAT changes
- A change in the VAT registration thresholds for self-employed persons and businesses will be taking effect. The level of turnover is increasing from €40,000 to €42,500 for services, and from €80,000 to €85,000 for goods, before a business must register itself for VAT.
- The 9% temporary reduced rate of VAT for gas and electricity will be extended for a further 6 months, until 30 April 2025.
- VAT charged on the installation of heat pumps will be reduced from 23% to 9% to complement the National Retrofit Plan which focuses on retrofitting homes to replace older, less efficient heating systems.
STAY INFORMED – WE’RE HERE TO HELP
Fenero is here to help you understand how Budget 2025 impacts you. If you need more information, please reach out to one of our team on hello@fenero.ie or call +353 1 6877400
For any initiatives where timelines are unclear at this time or further details are to follow from government in the coming days and weeks, follow Fenero on LinkedIn to be kept up to date with relevant and important news.
