Budget 2025 Ireland Unpacked!

Analysis and commentary from AAB’s team of tax experts, identifying the key changes and outlining the practical implications of the Budget 2025 Ireland for you and your business.

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Yesterday, Minister for Finance Jack Chambers unveiled the eagerly anticipated 2025 Budget Ireland which many predicted would be a giveaway budget.

The Minister announced his first budget against the backdrop of the recent Apple tax judgment of €13bn.  He said that it is imperative that this revenue is not used for day-to-day expenditure or to narrow the tax base and that it is this Government’s view that we should utilise these revenues to address the known challenges that we face in housing, energy, water and transport infrastructure.

The AAB Budget 2025 Ireland Guide will help you check the main changes that could impact you or your business. A summary of the key points are laid out below.

Budget 2025 Ireland Highlights

Income Tax Changes

One significant announcement that will directly impact individuals is the increase in the entry point for the higher rate of income tax. The threshold has been raised by €2,000 to €44,000, allowing taxpayers to enjoy the 20% rate for income up to this amount.

Capital Acquisitions Tax Changes

The Capital Acquisition Tax Thresholds are increasing. The Group A threshold, which includes gifts or inheritance from parents to their children, will rise from €335,000 to €400,000.

The Minister announced a further condition for Agricultural Relief on the transfer of agricultural property. He is extending the six-year active farmer test to the person who provides the gift or inheritance. This is in response to concerns that Agricultural Relief is being used as part of tax planning strategies by wealthy individuals.

Stamp Duty

From today there will be a new 6% Stamp Duty rate for residential property sales worth over €1.5 million. The existing rate of 1% will continue to apply to values up to €1 million, and 2% on values above €1 million.

There will also be an increase in the higher rate of Stamp Duty on bulk acquisitions of houses from 10% to 15% with immediate effect.

Agricultural Reliefs Extended

Recognising the significance of the agricultural sector, Minister Chambers extended several agricultural stock reliefs that were set to expire. He is also broadening the scope of accelerated capital allowances for farm safety equipment by adding further qualifying farm safety equipment types.

Measures to Address Housing Crisis

In his speech the Minister Chambers confirms that it is the government’s priority to continue to accelerate the supply of new homes.

The rental tax credit has been increased to €1,000 for 2025, providing relief to renters.

The mortgage interest relief announced in last year’s budget is extended for another year. This means that the relief will be available assist mortgage holders in respect of the increase in interest paid in 2024 over 2022.

Relief for pre-letting expenses for landlords is extended to the end of 2027. This relief applies to residential premisses which have been vacant for at least 12 months.

Support for Cost of Living

To address the rising cost of living, the government has implemented several measures:

1. The minimum wage will increase to €13.50 per hour starting 1 January 2025.
2. Energy credits of €250 will be provided to assist with energy bills.
3. Reduced 9% VAT on electricity and gas extended until 30 April 2025.
4. There will be two double payments of Child Benefit in November and December and ‘Baby boost’ payment of €420 for new parents.

Budget 2025 Ireland Key Take-Aways

The Budget 2025 Ireland also includes some key take-aways in relation to business taxes, income tax, and VAT.

Business Taxes changes include:

• The small benefit exemption has increased to €1,500. This allows employers to give employees a tax free non-cash bonus of up to €1,500.
• Increase in the first year threshold in the R&D tax credit from €50,000 to €75,000 to provide “further cash-flow support” to companies undertaking smaller R&D projects or engaging with credit for first time.
• Extension of Employment Investment Incentive, the Start-Up Relief for Entrepreneurs and the Start-Up Capital Incentive for a further two years, to the end of 2026.
• New relief for businesses scaling up with the introduction of relief for expenses incurred in connection with a first listing on an Irish or European stock exchange, subject to a cap of €1 million.

Income tax changes include:

• an increase in the standard rate band to €44,000, meaning the top rate of income tax will only apply to income above this threshold. There will also be an increase in personal tax credits, employee tax credits, and earned income credits, along with a reduction in the 4% rate of Universal Social Charge (USC) to 3%. The rental tax credit will rise to €1,000 per annum for 2025.

VAT changes include:

• The registration thresholds will be raised, with the service threshold increasing from €40,000 to €42,500 and the goods threshold from €80,000 to €85,000.
• Additionally, the reduced VAT rate of 9% for electricity and gas will be extended for an additional 6 months to 30 April 2025.
• The flat rate addition for farmers will increase from 4.8% to 5.1% from 1 January 2025.

The Minister intends this budget will put in place the policies and measures to continue the positive trajectory and ensure that all our people see a promising and hopeful future in this country.

As accountants and tax advisers, we can advise on how the Budget 2025 Ireland changes will affect you and your business. For more information on this year’s Irish Budget, contact our Tax Team.

AAB’s Tax Division is made up of Tax Specialists who are based both Ireland and UK. This means our Tax Team are experts on the intricacies and complex reporting requirements of both tax jurisdictions on the Island of Ireland, ensuring we provide the best possible advice to our clients.

Talk to us now for advice on making the most of the opportunities available to you and your business.