Budget 2025

Budget 2025 Summary:

• Income Tax - Increase in tax bands, tax credits and a reduction in certain USC rates. 
• VAT - No VAT reduction for the hospitality sector but general VAT registration thresholds have increased.
• Employers - There have been welcome enhancements to the Small Benefit Exemption Scheme. There has been an increase in the Minimum Wage hourly rate.
• Capital Acquisitions Tax - There have been increases in all the Group Thresholds, most notably, the Group A threshold has increased from €335,000 to €400,000.
• Retirement Relief - There has been somewhat of a restoration of this relief in respect of intergenerational succession planning. 
• Property - New Stamp Duty rate for certain residential property valued over €1.5m. 

 

Income Tax

As expected, there were a number of changes to tax bands, tax credits and USC rates that will see a bottom-line increase in take home pay for all households.

The Standard Rate Cut Off Point, being the amount that an individual can earn at the lower rate of tax has increased by €2,000 to €44,000. 

The USC rate of 4% has been reduced to 3%

The main tax credits of Personal, Employee and Earned tax credits have all increased by €125. 

By way of an example, an individual earning say €70,000 gross per year should have additional take home pay of circa €1,000 after taking into account the above additional tax cuts. 

 

VAT Thresholds

The VAT registration thresholds for the supply of goods and services are to be increased. 

The thresholds are currently €80,000 (for goods) and €40,000 (for services) respectively and these are to increase to €85,000 and €42,500 respectively. 

 

Employers

 

Small Benefit Exemption Scheme

The annual Small Benefit Execption Scheme, that has proven to be a great success in rewarding employees, is increasing from €1,000 to €1,500. It is not immediately apparent if this will be in place before this Christmas. 

It was also noted that the frequency of the benefits permitted under this scheme will increase to five per year. 

 

Minimum Wage

Effective, 1 January 2025, the national minimum wage will increase by €0.80 per hour, making it so that the new hourly rate is €13.50 per hour. 

 

Electric Vehicle (EV)

In respect of BIK on company cars, the temporary “universal relief” of €10,000, that was introduced during the year 2023, is to be extended for another year. 

By way of an example, where an employer provides you with an EV for the year 2025 and it is valued at say €50,000, this value will firstly be reduced by €35,000 (being an amount that was already provided for in the legislation) and then furthermore by the “universal relief” of €10,000, leaving a taxable value of €5,000.

The hope is that this extension will incentivise car buyers to choose the EV option. 

Separately, a welcome practical enhancement to the rules in respect of EV’s is where your employer provides an EV charger in your home, then a BIK exemption will be available for employees/directors in this regard. 

 

Capital Acquisition Tax (“CAT”)

In a move that was well mooted before the announcement of the Budget, the Group A Threshold has increased from €335,000 to €400,000. The tax value of this increase is approximately €21,500 i.e., (€400,000- €335,000) x 33%. 

Separately, the Group B and C Thresholds have also increased to €40,000 and €20,000 respectively, up from €32,500 and €16,250.

 

Hospitality Sector

The minister announced a business support flat rate payment of €4,000 to the retail and hospitality sector, where your rates bill is less than €30,000. More to follow on this support scheme. 

 

Retirement Relief

There had been calls to reverse certain changes introduced in the last Finance Act in respect of Retirement Relief. There was a cap of €10 million introduced on what the business owner could pass to their children.

Whilst this move has not been reversed, there has been a welcome amendment, “where the child retains the assets for more than 12 years, the CGT will be fully abated”. 

 

R&D

In a move to support cashflow for businesses engaged in “smaller” R&D activity and those engaged in R&D activities for the first time, the minister announced an increase in the first-year payment threshold in the R&D tax credit, from €50,000 to €75,000.

The Minister also expressed his intention to continue to work on simplifying access to and the operation of the R&D scheme. 

 

Startups/Investments

It was announced that there will be an increase in Capital Gains Tax relief in respect of investment in innovative start-ups. The lifetime limit on gains to which the relief applies will increase from €3m to €10m. 

It was also announced that EII, SURE and the Start Up Capital Incentive will be extended out to the end of the year 2026. 

Also, the amount an investor can claim relief upon under EII will double i.e., from €500k up to €1m, and relief under SURE will also be increased, €700k to €980k. 

 

Property

 

Stamp Duty 

In what may have come as a surprise to many, the rate of Stamp Duty on residential property valued over €1.5m is to increase to 6% (with effect from tonight). There will be the certain usual transitional measures in place, where property transactions are at a certain stage.

The existing rate of 1% continues to apply to values up to €1m, and 2% on values above €1m. The 6% rate will apply to the values in excess of €1.5m. 

 

Landlords 

The deduction available to landlords in respect of certain pre-letting expenditure, has been extended out until the end of the year 2027 i.e., a three-year extension. 

 

Rent Tax Credit

As expected, the rent tax credit is increasing by €250 to bring it to €1,000 for an individual for the year 2025.

However, in a welcome move the Minister has also moved the credit to €1,000 for an individual for the current year 2024. 

 

Mortgage interest relief

In light of rising costs for households, it was announced that mortgage interest relief will be extended for another year.

 

Vacant Homes Tax

The Vacant Homes Tax rate is to increase from five to seven times the property’s existing base Local Property Tax rate.

 

Agriculture Sector

It was announced that the general reliefs in respect of General Stock Relief, Stock Relief for Young Trained Farmers and Stock Relief for Registered Farm Partnerships are to be extended out to the end of the year 2027.

There will be certain tweaks to Stamp Duty reliefs for Young Trained Farmers and farmers who lease land. In short, the reliefs should apply going forward where the farmers are operating their farming business through a limited company. 

The Minister outlined his intention, effective 1 January 2025, to increase the VAT flat rate for farmers from the current rate of 4.8% to 5.1%. 

The Minister broadened the scope of farm safety equipment that should qualify for Accelerated Capital Allowances. 

In an interesting move, that he noted was “to address concerns that Agricultural Relief is being used as part of tax planning strategies by wealthy individuals”, there will be an extension of the six-year active farmer test to the person who provided the gift/inheritance.

 

 

 

Date published 21 Aug 2024 | Last updated 2 Oct 2024

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