What we might see in Budget 2025

As October approaches, the topic of Budget 2025 has been widely covered in the media. 

Budget 2025 will be delivered by Finance Minister Jack Chambers next week and we expect to see some changes that will affect our clients. 

We expect to see changes to Capital Acquisitions Tax and Income Tax, clarification on Auto-Enrolment and more cost-of-living measures …

 

Capital Acquisitions Tax

An important change that is being anticipated for inclusion in Budget 2025 is the extension of the Group A tax-free inheritance threshold, which applies to transfers from parents to children and subject to certain conditions from children to parents. 

Currently set at €335,000, it is believed that this threshold may increase to around €400,000

 

Income Tax

We expect to see an increase in the income tax standard rate band following recent trends. Last year, the threshold at which income becomes taxable at the 40% rate rose by €2,000 to €42,000. A further increase, possibly at a higher level, is expected this year. 

Additionally, it is expected that there will be some changes in respect of USC, this might look like a decrease in the 4% rate or an expansion of the bands taking more taxpayers out of the higher 8% bracket.

There is also a slight hope that the USC surcharge for the self-employed sector might be cut, which of course should result in a welcome tax saving for many operating in the SME sector

Overall, it has been suggested that there is a government aim to give circa €1,000 in tax cuts to the ‘ordinary worker’.

 

Rent Tax Credit

We would expect to see the rent tax credit increase from €750 to €1,000.

 

Employers: When will Auto-enrolment come into effect?

In 2024, legislation was passed to pave the way for pension auto-enrolment (AE), where employees not currently in a pension scheme will be automatically enrolled in a new State top-up scheme. This would create new obligations for employers that it will be important to plan for.

Auto-enrolment is expected to go live in 2025, although a delay until late in the year is being considered – we will be watching Budget 2025 closely for clarity on this point.

 

General Cost of Living Measures

Following the trends of the last two budgets, once-off cost of living measures are anticipated. For example, a new lump sum energy credit, to be delivered before Christmas, is currently under consideration.

 

Retirement Relief

There have 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. It is difficult to say whether this curtailment will be reversed, but in our view a reversal would be most welcome. 

 

Budget Newsletter

Following the announcement of Budget 2025 on 01 October 2024 we will produce a full report outlining how it will affect small businesses and the self-employed. Register for our Budget Newsletter to get our report delivered straight to your inbox.

 

Date published 24 Sep 2024 | Last updated 24 Sep 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.