Today, Minister for Finance, Jack Chambers and Minister for Public Expenditure, National Development Plan Delivery and Reform, Paschal O’Donohue delivered Budget 2025. As was widely anticipated and publicised, the focus was on the ongoing cost-of-living crisis and the need for economic stability. The budget included measures aimed at easing financial pressures on households with several once-off payments announced. Key initiatives included increased funding for social welfare programs, substantial investments in water and electricity infrastructure together with healthcare and housing. Additionally, there was emphasis on environmental sustainability and economic growth, highlighting the importance of transitioning to renewable energy sources, with significant allocations for climate neutrality objectives. The budget also included provisions for education and employment, aiming to foster a resilient and inclusive economy.
This year’s Budget contained new tax measures designed to support low and middle-income earners. Some of the key highlights, from a tax perspective, is the upward movement to the entry point for the higher rate of income tax at 40% and an increase to several of the income tax credits. An individual can now earn €44,000 before the higher rate of income tax applies and the main income tax credits will each increase by €125 from €1,875 to €2,000. There was also a welcome reduction in the 4% USC rate to 3% and the much sought after increase in class thresholds for gift and inheritance tax.
Below is a summary of the key budget measures:
TAXATION MEASURES
Income Tax
The income tax standard rate band cut-off point is increasing by €2,000 for all earners as follows:
- Single, widowed or surviving civil partner from €42,000 to €44,000;
- Single, widowed or surviving civil partners, qualifying for the Single Person Child Carer Credit from €46,000 to €48,000;
- Married couples or civil partners (one income) from €51,000 to €53,000;
- Married couples or civil partners (two incomes) from €51,000 to €53,000 (with an increase of max €35,000).
Budget 2025 provides for the following changes to income tax credits:
- An increase of €125 in the Personal Tax Credit from €1,875 to €2,000
- An increase of €125 in the Employee Tax Credit from €1,875 to €2,000
- An increase of €125 in the Earned Income Tax Credit from €1,875 to €2,000
- An increase of €150 in the Home Carer Tax Credit from €1,800 to €1,950
- An increase of €150 in the Single Person Child Carer Tax Credit from €1,750 to €1,900
- An increase of €300 in the Incapacitated Child Tax Credit from €3,500 to €3,800
- An increase of €300 in the Blind Person’s Tax Credit from €1,650 to €1,950
- An increase of €60 in the Dependent Relative Tax Credit from €245 to €305
- The €1,500 annual Sea-going Naval Personnel tax credit for Irish Naval Service members with at least 80 days at sea will be extended for 5 years until the end of 2029.
Universal Social Charge
Government is providing for an increase in the ceiling for the 2% rate of the USC of €1,622 from €25,760 to €27,382.
Government is also reducing the 4% rate of USC to 3%. This rate applies to income between €27,382 and €70,044.
Incomes less than €13,000 are exempt from USC. Otherwise, the following USC rates will apply from 1 January 2025:
- €0 – €12,012 @ 0.5%
- €12,013 - €27,382 @ 2%
- €27,383 - €70,444 @ 3%
- €70,445+ @ 8%
- Self-employed income over €100,000: 3% surcharge
Pension Changes
The Finance Bill 2024 proposes that the tax treatment for the Automatic Enrolment Retirement Savings Scheme (AE) will align the treatment of Personal Retirement Savings Accounts (PRSAs), other than for employee contributions. Employer contributions will be tax-relieved, and growth in AE funds will be tax-exempt, with funds taxed upon withdrawal, excluding a 25% tax-free lump sum. There is no tax relief for employee contributions proposed as the State directly contributes to the AE scheme.
Mortgage Interest Tax Relief
Mortgage interest tax relief will be extended for another year. Qualifying homeowners can claim relief on the increased interest paid in 2024 compared to 2022 at the standard income tax rate of 20%, capped at €1,250 per property.
Housing
Help to Buy
The Help to Buy scheme will be extended for a further 4 years to the end of 2029.
Rent Tax Credit
To assist renters with the cost of living in the 2024 tax year, the rent tax credit is being increased by €250 for single persons (and €500 in the case of jointly assessed taxpayers). Starting in 2025, the rent tax credit is being amended from €750 to €1,000 (€2,000 for jointly assessed taxpayers).
Pre-letting Expenses
A deduction (capped at €10,000 per premises) from rental income for certain pre-letting expenditure will be extended to the 31st December 2027.
Stamp Duty on the bulk acquisition of houses
The Stamp Duty rate for acquiring 10 or more houses in 12 months will increase from 10% to 15%, effective from Budget night, with transitional arrangements in place.
Stamp Duty on residential property value above €1.5 million
A new third rate of Stamp Duty of 6% will be introduced for residential properties with a value or acquisition price exceeding €1.5 million, applying only to the portion above that threshold. The existing rates of 1% for values up to €1 million and 2% for values between €1 million and €1.5 million will remain unchanged.
Vacant Homes Tax
The Vacant Homes Tax rate will increase from five to seven times the property's base Local Property Tax liability, starting from 1 November 2024.
Residential Zoned Land Tax (RZLT)
Amendments in Finance Bill 2024 will offer landowners the opportunity in 2025 to request rezoning based on their economic activity. New legislation will allow a 12-month deferral of RZLT between planning approval and development, exemption during third-party Judicial Review Proceedings, and other technical amendments. Local Government and Heritage will issue guidelines to local authorities to accommodate rezoning requests where landowners seek to continue undertaking existing economic activity.
Personal reliefs
Angel Investor Capital Gains Tax Relief
The lifetime limit on gains eligible for the reduced Capital Gains Tax rate under the Angel Investor Capital Gains Tax Relief will increase from €3 million to €10 million.
Capital Gain Tax Retirement Relief
A clawback period of 12 years will be introduced for relief available on disposals over €10 million, after which CGT will be abated. These changes are to ensure that the intergenerational transfer of Irish family businesses continues to be supported by the tax system.
Relief for Investment in Corporate Trades
It is proposed the Relief for Investment in Corporate Trades, including the Employment Investment Incentive (EII), Start-Up Relief for Entrepreneurs (SURE) and the Start-Up Capital Incentive (SCI), will be extended until 31 December 2025. The EII investment limit for relief for a qualifying investor will increase from €500,000 to €1,000,000. It has been proposed to increase the relief available to a maximum of €140,000 per year (€980,000 over 7 years) for SURE investments.
Capital Acquisition Tax (CAT) Agricultural Relief
This proposal requires a donor to meet the 6-year Active Farmer test for the beneficiary to
benefit from Agricultural Relief and is a tax relief limiting measure to narrow this relief to safeguard the tax relief for genuine active farmers.
Capital Acquisition Tax (CAT) Thresholds
The CAT “group tax-free thresholds” for gifts or inheritances will increase as follows:
- CAT group A threshold to €400,000
- CAT group B threshold to €40,000, and
- CAT group C threshold to €20,000.
Businesses
Research and Development (R&D) Tax Credit
The first-year payment threshold of the R&D tax credit will increase from €50,000 to €75,000. This change is expected to benefit around 44% of claimants for payment of the credit in full in their first year.
Section 486C Start Up Relief
The relief, capped at €40,000 per year, can be carried forward if unused within 5 years and is currently tied to employer PRSI. A proposed change will allow up to €1,000 of Class S PRSI per owner-director to count toward the cap, providing additional support for small, owner-managed start-ups.
Audio-Visual Incentives
It is proposed to introduce the following 2 new audio-visual incentives:
- the Tax Credit for Unscripted Production
- The relief will be a corporation tax credit for expenditure on unscripted productions, available at a rate of 20% of eligible production costs, capped at €15 million per project. The credit's commencement is contingent upon receiving State aid approval from the European Commission.
- Scéal Uplift for small to medium budget productions
- The Scéal Uplift introduces an 8% uplift to the existing film tax credit for certain feature film productions. The uplift will result in a tax credit rate of 40% for feature films in respect of projects with a maximum qualifying expenditure of up to €20 million.
Participation Exemption
A participation exemption for foreign dividends is proposed, allowing relevant distributions received from subsidiaries in EU/EEA and tax treaty partner jurisdictions to be exempt from tax, effective from 1 January 2025.
Relief for Stock Market Listing Expenses
It is proposed to introduce a new measure giving relief for expenses incurred during an initial stock market listing (IPO). This deduction will apply to expenses incurred only on a first listing on a recognized stock exchange in Ireland or the EU/EEA. The relief will be available to investment companies as an expense of management, or to trading companies as a trading deduction. Expenses wholly and exclusively incurred for the purposes of the listing, both in the year of listing and the previous three years, will be allowable, subject to the overall €1 million cap. The measure will apply for successful listings completed on or after 1 January 2025.
Small Benefit Exemption
It is proposed to increase the limit of the “Small Benefit Exemption” to €1,500 and increase the number of benefits that an employer can give, from two to five per year (cumulative total of first five benefits in a year shall not exceed €1,500).
Increase in VAT Registration Thresholds
It is proposed to increase the VAT thresholds to €42,500 for services and €85,000 for goods to assist small businesses to remain outside of the VAT threshold.
Alcohol Products Tax Relief Measure
The excise relief for independent small producers of cider and perry is being extended to cover what is known as other fermented beverages, which includes products such as mead and wines other than grape wine such as elderberry wine, strawberry wine etc., as well as to higher strength cider and perry.
BIK Measure: Original Market Value Deduction for Certain Categories of Vehicles
The temporary universal relief of €10,000 applied to the Original Market Value of a vehicle (including vans) for vehicles in Category A-D and the amendment to the lower limit of the highest mileage band is being extended to 31 December 2025.
Agri-Food Sector
Accelerated Capital Allowances – Farm Safety Equipment
This measure is being broadened to allow for relief in respect of expenditure by famers on certain Targeted Agriculture Modernisation Schemes (TAMS) eligible safety equipment not currently supported.
Stock Relief (General, Young Trained Farmer and Registered Farm Partnerships)
The following 3 stock reliefs will be extended for 3 more years until 31 December 2027:
- General Stock Relief,
- Young Trained Farmer Stock Relief, and
- Stock Relief for Registered Farm Partnerships.
Farmer’s Flat Rate compensation
The flat-rate scheme compensates unregistered farmers on an overall basis for VAT incurred on their farming inputs. Based on macro-economic data received from the CSO and the Revenue Commissioners for the period 2022-2024, this rate will increase from the current 4.8% to 5.1% from 1 January 2025.
Climate Action Taxation
Carbon Tax
The rate per tonne of carbon dioxide emitted for petrol and diesel will increase from €56.00 to €63.50 from 9 October as per the trajectory set out in the Finance Act 2020. This increase will be applied to all other fuels with effect from 1 May 2025.
Emissions based VRT for Category B Vehicles
An emissions-based approach to VRT for category B commercial vehicles will be introduced, featuring a lower 8% rate for vehicles with CO2 emissions under 120 grams per kilometre to encourage the adoption of low-emission vehicles.
Weight Carriage Ratio
The weight carriage ratio for electric commercial vehicles is being changed to enable them to qualify for the VRT rate of €200.
Accelerated Capital Allowances – Gas & Hydrogen Vehicles
The Accelerated Capital Allowances scheme for gas and hydrogen-powered vehicles and refuelling equipment is proposed to be extended until 31 December 2025.
BIK treatment of Battery Electric Vehicle (BEV) home chargers
A BIK exemption will apply when an employer incurs expenses for providing electric vehicle charging facilities at the home of a director or employee.
Emission thresholds for vehicle capital allowances
Starting 1 January 2027, the CO2 thresholds for claiming capital allowances on business cars will be lowered as follows:
- An expenditure of €24,000 will be allowed for cars with CO2 emissions of 0-120g/km,
- An expenditure of €12,000 will be allowed for vehicles with emissions of 121-140g/km,
- and no allowable expenditure for vehicles emitting over 141g/km.
Other
VAT Extension of 9% for gas and electricity
It is proposed to extend the 9% VAT rate from 1 November 2024 to 30 April 2025 to address
cost of living pressures associated with the price of gas and electricity.
VAT rate on the supply and installation of heat pumps
A reduced VAT rate of 9% for heat pumps meeting specific technical standards is proposed to take effect from 1 January 2025, aimed at incentivising homeowners to install them following amendments to the VAT Directive.
EXPENDITURE MEASURES
As inflation continues to provide a challenge to households across the country, Budget 2025 contained a wide range of core and temporary expenditure measures with the aim of combatting the ongoing cost-of-living crisis and improving the overall living standards of Irish citizens.
Health
Minister Donohue is making available funding for a range of new measures aimed at increasing access, affordability and capacity within Irish health services including:
- the introduction of 495 new beds to the health service, bringing the total number of beds to 18,000
- increasing access to IVF and HRT free of charge
- 600,000 additional home support hours
Social Protection
A Social Protection package for 2025 worth almost €1.2 billion was confirmed targeting those most in need. The package includes:
- a €12 increase in the weekly main social welfare rate for working age recipients and pensioners
- a comprehensive carer’s package with increases to the Means Tests Disregard, Domiciliary Care Allowance, Carer’s Support Grant, and a Fuel Allowance
- an extension of the Hot School Meals programme to all primary schools in 2025
- an introduction of a school meals holiday hunger pilot project.
Housing
The Minister has provided €7.8 billion to the Department of Housing, Local Government and Heritage for projects including:
- 10,000 new-build social homes and €560 million for key affordable housing schemes supporting the delivery of 6,400 affordable homes
- 10,000 new tenancies supported through the Housing Assistance Payment and Rental Accommodation Schemes
- €1.65 billion in current funding will continue to support 66,000 households in active social housing tenancies
- 7,400 new social housing leases
Education
The Minister expressed his view that there was a need to develop a dynamic, inclusive, and affordable education system to allow Ireland to build for tomorrow. Measures announced include:
- €78 million to support the continued growth of the craft apprenticeships system to 6,800 apprentice registrations
- €1.3 billion to support 350 school building projects currently underway as well as a further 200 new school projects.
- 768 additional special education teachers and 1,600 more Special Needs Assistants
- the rollout of supports to allow schools become smartphone free areas throughout the school day
- extension of the Free Schoolbooks initiative to all senior cycle pupils in recognised post primary schools within the free education scheme
National Development Plan
To date, a record investment has been made by the Irish government under the National Development Plan. To accelerate the roll-out of the National Development Plan, Budget 2025 contained an additional €400 million of funding.
Agriculture, Food, and the Marine
Given that a key driver of a greener future will be in the Irish agri-food sector, it was important that Budget 2025 supported this sector. Supports announced include
- a continued commitment to support sustainable farming through areas of natural constraint, forestry, organic farming and other schemes
- €30 million for a new tillage scheme supporting farmers to plant their field crops
- €8 million to enhance payment rates on the Beef Welfare Scheme
- €10 million for animal health measures improving biosecurity
- €22 million for the continuation of the National Sheep Welfare Scheme into 2025
Transport
Given that it is necessary to have a strong transport infrastructure for connectivity and for Ireland to attain its climate objectives, Budget 2025 contained an announcement of €3.9 billion for the Department of Transport, with over €1 billion in current funding and €2.9 billion in capital funding. The transport measures include:
- continued rollout of the BusConnects programme in our cities and more town bus services
- a new and modern Coast Guard Search and Rescue contract
- continuing €1 million per day investment in cycling and walking infrastructure
- fare initiatives on public transport, including the Young Adult Card and the ninety-minute fare, continued to end of 2025
- €99 million financing agreement for the Port of Cork to develop infrastructure which can facilitate offshore renewable projects
Rural and Community Development
The Government believes that the development of sustainable communities is necessary to drive enterprise growth and increase remote working capability. Therefore, €235 million was allocated to help support the revitalisation of rural Ireland through infrastructure and schemes
In addition to core funding for rural and community development for 2025, Budget 2025 also includes
- €13 million to help integrate migrants from Ukraine into local communities
- an additional €25 million to the Community Recognition Fund for upgrades to sports facilities, community centres, parks, walking trails and playgrounds
Safety and Security
Measures announced in the Justice and Defence sectors include:
- significant increase in funding for the Irish Prisons Service, which includes provision for up to 350 additional staff
- funding for the recruitment of a further 1,000 Gardaí and up to 150 Garda civilian staff next year
- €7 million for organisations providing supports to victims of domestic, sexual and gender-based violence
- funding for the recruitment, training, and support of a net increase of 400 military personnel
- highest ever allocation to Overseas Development Assistance
Culture and Society
The Minister acknowledged Ireland’s unique position relating to our culture and included the following in the Budget 2025 measures:
- almost €380 million to arts and culture
- €231 million to sports which will benefit clubs and organisations in every corner of the country
Contact Us
Colin Dignam | Tax Director | Dublin
colin.dignam@mooreireland.ie
+353 1 888 1004
Joanne O'Brien | Tax Director | Cork
joanne.o'brien@mooreireland.ie
+353 21 427 5176
Eoghan Bracken | Tax Partner | Dublin
eoghan.bracken@mooreireland.ie
+353 1 888 1004
Padraig O’Donoghue | Tax Partner | Cork
padraig.odonoghue@mooreireland.ie
+353 21 427 5176