The Minister for Finance, Jack Chambers, and the Minister for Public Expenditure and Reform, Paschal Donohoe, presented the fifth Budget of the coalition Government on Tuesday.
Budget 2025 was Minister Chamber’s first and in light of the recent judgement from the Court of Justice of the European Union, it provided once-off revenue that could be transformational and should deliver for the future of our country.
The budget measures announced are aimed at strengthening communities, building prosperity, tackling the current cost-of-living crisis and maintaining/improving Ireland’s competitiveness in a global economy.
An overview of the key measures announced are set out below.
Income tax
The standard rate cut-off point has increased to €44,000 for single people and €53,000 for married couples/civil partners, meaning the higher rate of income tax will start when income exceeds these amounts.
There are two changes to the Universal Social Charge (“USC” ):
An increase in the entry threshold to the second-rate band from €25,760 to €27,382 in line with the €0.80 per hour increase in the minimum wage (rising to €13.50 per hour with effect from 1 January 2025 ).
A reduction in the rate of the third-rate band from 4% to 3%.
We have outlined below the associated increases in the tax credits along with the benefit arising from the above changes.
Social welfare and related measures
There will be an increase of €12 in Social Protection payments.
All recipients of the normal weekly fuel allowance will receive a lump sum payment of €300 this year.
The recipients of the Living Alone Allowance will receive an additional €200 payment this year.
A once-off bonus double payment will be made in October to pensioners, jobseekers, carers, lone parents and long-term unemployed.
An additional payment of €400 will be made before Christmas to those who qualify for the Carer’s Support, Disability Allowance, Invalidity Pension, Blind Pension and the Domiciliary Care Allowance.
Two double child benefit payments will be paid before Christmas, together with a double payment of the Foster Care allowance.
There will be a one-off €400 payment to those claiming the Working Family Payment this year.
The Qualified Child payment will increase by €4 per week for under 12s and €8 per week for over 12s.
Capital Acquisitions Tax (“CAT” )
The CAT thresholds have been increased to the following amounts:
Category A – €400,000 (generally gifts/inheritances from parents to children ),
Category B - €40,000 (generally gifts/inheritances from relations ),
Category C - €20,000 (generally gifts/inheritances from non-related individuals ).
Housing
The Help-to-Buy scheme has been extended to the end of 2029.
The rent tax credit will increase as follows for both 2024 and 2025:
Increase by €250 to €1,000 per annum for single persons and
Increase by €500 to €2,000 per annum for jointly assessed taxpayers.
The energy credit will be paid in two instalments of €125, one before the end of 2024 and one in 2025.
Pre-letting expense relief for landlords has been extended to the end of 2027.
The vacant property tax will be increased from five to seven times the rate of Local Property Tax.
Mortgage Interest Tax Relief has been extended for one further year in respect of the increased interest paid on the mortgage in the calendar year 2024 as compared with the amount paid in 2022.
A third rate of stamp duty will apply to properties with a value in excess of €1.5m. The existing 1% stamp duty rate applies up to €1m, 2% will apply for property valued between €1m – €1.5m and the 6% rate applies on the value over €1.5m.
Education and sports
There will be a continued reduction in the student contribution fee of €1,000 for those eligible for the free fee initiative, a once off reduction of approximately 33% in the contribution fee for apprentices in higher education and an increase in the Post Graduate Tuition fee contribution of €1,000 for student grant recipients.
The free schoolbooks scheme will be extended to all transition year and senior cycle pupils in recognised post primary schools within the Free Education Scheme.
Greater flexibility will be offered for those making donations to sports bodies for capital projects and a choice will be available for the income tax relief on these donations (tax relief will be available for either the individual or the sporting body ).
Business tax incentives
Last year the introduction of a participation exemption for foreign sourced dividends was announced. The introduction of this exemption is intended to reduce the administrative burden on businesses of claiming double tax relief and it was announced in this budget that the exemption will be effective from 1 January 2025. Further consideration is being given to a foreign branch exemption.
An increase to €75,000 of the first-year installment of the R&D tax credit to provide cash-flow support for companies undertaking small R&D projects was announced.
Relief available to investors will increase from €500,000 to €1 million under the Employment Investment Incentive and from €700,000 to €980,000 under the Start-Up Relief for Entrepreneurs. Availability of both reliefs has also been extended to the end of 2026.
VAT
An increase in the VAT registration thresholds from €40,000 to €42,500 for services and €80,000 to €85,000 for goods was announced.
The 9% VAT rate for electricity and gas is to be extended for another 6 months to 30 April 2025.
VAT on heat pumps will reduce from 23% to 9% with effect from 1 January 2025.
The flat-rate farmer VAT compensation scheme will increase from 4.8% to 5.1% from 1 January 2025.
Climate
In relation to the BIK regime for company cars, the temporary universal relief of €10,000 to the Original Market Value (“OMV” ) will be extended for a further year.
A BIK exemption will be introduced for the provision of electric vehicle charges at the home of a director or employee.
There has been an increase in the rate of carbon tax from €56 to €63.50 per tonne. The increase will apply to petrol and diesel from 9 October 2024.
Other
The excise duty on a packet of 20 cigarettes will be increased by €1, with a pro-rata increase on other tobacco products.
A domestic tax of €0.50 per ml of e-liquid will be introduced on e-cigarettes from mid-2025 onwards.
Employers can award a non-cash tax-free benefit of up to €1,500 (in five awards throughout the year ) to employees under enhancements to the Small Benefit Exemption.
This article was compiled by Alana Gallagher and Darren Dooley of KPMG, Dockgate, Dock Road, Galway. Tel: 091-534600. For further information on Budget 2025 log on to: kpmg.ie/budget2025
