Budget 2025: key measures

There were no changes to the rates of income tax, corporation tax, capital gains tax or capital acquisitions tax rates. The marginal rate of tax and levies on the income of higher earners remains above 50% which might surprise some who see Ireland as a ‘low tax’ economy because of its low corporation tax rate.

Cost of living

Targeted measures include the following:

• The minimum wage will increase to €13.50 per hour.
• There will be a €12 per week increase in most weekly social welfare payments from January 2025.
• An October cost-of-living bonus will be paid to all qualifying Social Protection recipients.
• There will be a €15 increase in the weekly Maternity Benefit, Paternity Benefit, Adoptive Benefit and Parent’s Benefit from January 2025.
• Mortgage interest relief tax credit has been given a one-year extension.
• There is an increase in tax credits and the standard rate income tax band.
• There is a reduction in the student contribution for third level courses, fees for apprentices in higher education and post-graduate tuition fees contribution, along with additional funding to support students through the Student Assistance Fund.

Energy costs

Measures introduced to address rises in energy costs include:

• A €250 credit for household energy bills will be paid in two equal instalments, with the first payment to be made before the end of the year and the second payment to be made after the end of the year.
• The 9% rate of VAT for electricity and gas supplies is extended until 30 April 2025.

Housing

The Budget included a number of measures to address the housing crisis:

• The personal rental tax credit will be increased to €1,000 for the tax years 2024 and 2025.
• A stamp duty rate of 1% on residential property will continue to apply on the first €1m, with a 2% rate applying to the next €500,000. A third rate of stamp duty on residential properties is to apply where the value/acquisition price exceeds €1.5m. It will apply at a rate of 6% on the balance of the consideration in excess of €1.5m.
• The higher rate of stamp duty on the acquisition of certain residential property where a person acquires at least 10 residential units during any 12-month period is being increased from 10% to 15%, with immediate effect.
• The vacant property tax will be increased from five to seven times the rate of Local Property Tax.
• The Help-to-Buy scheme has been extended to the end of 2029.
• The current relief for pre-letting expenses will be extended for a further three years to 31 December 2027.
• The proposed legislation will allow for a 12-month deferral of Residential Zoned Land Tax (RZLT) liability between the grant of planning and commencement of development, exemption during judicial review proceedings brought by a third party and some technical amendments.

Investment boost

Several measures have an impact from an investor’s perspective, with the focus on entrepreneurs and small businesses:

• The lifetime limit for ‘angel investors’ is increased from €3m to €10m.
• The first-year payment threshold for the R&D tax credit will be increased from €50,000 to €75,000.
• The Employment Investment Incentive (EII), Start-Up Relief for Entrepreneurs (SURE) and Start-up Capital Incentive (SCI) will be extended for a further two years to the end of 2026. The amount an investor can claim relief on for EII investments will be doubled from €500,000 to €1,000,000.
• Pay-Related Social Insurance (PRSI) paid on director-owner salaries may, from 2025, be included in the calculation for relief for start-up companies.
• The cap of €10m on CGT relief for the transfer of a business to a child will be removed from January 2025, although the claw-back period will now extend to 12 years.
• A company will have the option to claim the participation exemption for foreign dividends or to continue to use existing tax-and-credit relief by way of an election in its annual corporation tax return.
• The donor will be required to meet the six-year active farmer test for the beneficiary to benefit from Agricultural Relief.
• The Young Trained Farmer Stamp Duty Relief will be revised to ensure relief is available where it is claimed by an individual who carries on the farm business through a company.

Support for the environment

• The rate of carbon tax will increase by €7.50 from €56 to €63.50 per tonne of carbon dioxide emitted for petrol and diesel from 9 October 2024, and to all other fuels from 1 May 2025.
• The Accelerated Capital Allowances (ACA) scheme for gas and hydrogen-powered vehicles and refuelling equipment will be extended for a further year to 31 December 2025.
• An emissions-based approach to Vehicle Registration Tax (VRT) for Category B commercial vehicles will be introduced.
• The CO2 thresholds for claiming capital allowances on business cars are being adjusted downward in light of improved vehicle emissions standards.
• The Benefit-in-Kind (BIK) regime will not be applied to the payment by an employer for the installation of EV charging at the employee’s home – regardless of whether the employee is supplied with an EV vehicle by the employer.

Other developments

• The pension Auto-Enrolment Savings Scheme will commence on 30 September 2025.
• The bank levy will be extended for one further year to 2025, and the insurance levy is reduced to 0%.
• The minister confirmed his intention to amend the Charitable Donations Tax Scheme, so that charities will no longer need to be established for at least two years to access the scheme. They will also have a longer time-frame from the date of a donation to use the funds raised under the scheme.
• With effect from 1 January 2025, the existing VAT registration thresholds for businesses will increase from €40,000 for services and €80,000 for goods to €42,500 for services and €85,000 for goods.
• Inheritance and gift tax thresholds have been increased: Group A Threshold from €335,000 to €400,000; the Group B Threshold from €32,500 to €40,000; and Group C Threshold from €16,250 to €20,000.
• The employees Small Benefit Exemption rises from €1,000 to €1,500.
• All classes of Pay-Related Social Insurance (PRSI) will increase by 0.1% from 1 October 2024, but there is a proposed reduction in USC in 2025 for one of the middle bands.

How does it add up?

The sources of taxation are highly skewed and, although the government has enjoyed an unprecedented surplus in this year, it is likely that there will be a deficit once windfall tax revenue is excluded.

In particular, the amount of corporation tax collected is out of line with international norms, as it accounts for  over 25% of all tax collected. Worryingly, the 10 largest taxpayers account for over half of that revenue.

In addition, the top 5% of earners pay almost 50% of the income tax, suggesting more needs to be done to broaden the tax base.

For now, the overall tax landscape has remained relatively unchanged and the precise impacts will not be clear until the Finance Act is passed, most likely  before the election.