The Irish government announced the Irish budget 2025 on the 1st of October 2024.
The budget outlines the government’s spending and revenues, including all government departments, agencies, non-commercial state bodies, and the local government sector.
Progressivity, fairness, and fostering genuine opportunities for the future have been at the heart of this government’s budgets, and these principles have been fundamental in shaping the design of Budget 2025
If you have any questions about these changes, please contact your accountant or a trusted advisor. We’re here to help.
Changes to VAT
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VAT registration thresholds
There will be an increase in the existing VAT registration thresholds for businesses from €40,000 for services and €80,000 for goods to €42,500 for services and €85,000 for goods respectively.
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Temporary VAT rate for gas and electricity
The 9% VAT rate for gas and electricity will be extended for 9 months, until 30th April 2025.
Measures to support Irish businesses
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Research and Development (R&D) tax credit
The R&D Tax Credit will increase from €50,000 to €75,000 to “provide further cash-flow support to companies engaged in smaller R&D projects.”
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Capital Gains Tax relief
The lifetime limit on gains eligible for the relief has been raised, aimed at encouraging investment in innovative startups. Angel investors can benefit form a reduced CGT rate of 16%, fostering growth and innovation within SMEs.
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Startup captial incentive
Startup Capital Incentive has been extended for a further 2 years, to the end of 2026.
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Corporation tax
The enhancement to Section 486C small company start-up relief allows small owner-managed startups to qualify for corporation tax relief based on Class S PRSI contributions. This change increases flexibility, making it easier for self-employed entrepreneurs or sole traders to access the tax benefits by recognising their PRSI payments as a criterion for relief.
Personal Income Tax changes
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USC (Universal Social Charge)
The 4.0% rate of USC is reduced to 3%. This is the second consecutive reduction in USC rates.
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Income tax cut off point
The standard rate band for income tax will increase by €2,000, from €42,000 to €44,000.
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Tax credits
The main tax credits (Personal, Employee and Earned Income Credit) will be increased by €125 each.
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Minimum wage
Minimum wage will increase to €13.50 per hour, seeing an increase of €0.80 per hour, in January 2025.
Tax credits
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Children
The Home Carer Tax Credit will increase by €150 to support stay-at-home parents and the incapacitated child tax credit is being increased by €300. The Single Person Child Carer Credit will increase €150
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Rental
The rent tax credit of €750 will increase by €250 per year for taxpayers who are paying rent on their principal private residence. Bringing the tax credit to €1,000 for individuals and €2,000 for a jointly assessed couple for 2025. The credit for 2024 has been raised to €1,000 for individuals and €2,000 for couples assessed jointly in light of the cost of living challenges many renters are facing.
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Dependent Relative
The Dependent Relative Credit will increase by €60
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Blind Tax Credit
The Blind Tax Credit will increase by €300, this is the first increases in many years to this credit.
Additional tax measures
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Benefit in Kind
The temporary universal relief of €10,000 to the Original Market Value for company cars is being extended for another year. In 2025, employees with electric company vehicles will benefit from a total Benefit-in-Kind (BIK) relief of €45,000. This includes a €35,000 relief specifically for electric vehicles and an additional temporary relief of €10,000. Furthermore, there will be a BIK exemption for electric vehicle chargers provided at the homes of directors or employees.
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Mortgage Interest Tax Relief
Mortgage Interest Tax relief will be extended for one further year. This extension means the relief will also be available to help mortgage holders with the increased interest payments in 2024 compared to 2022.
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Employment Investment Incentive Scheme
The Employment Investment Incentive Scheme has been extended for a further 2 years, to the end of 2026. The amount an investor can claim relief on for four-year investments under the Employment Investment Incentive Scheme has doubled from €500,000 to €1 million.
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Startup Relief for Entrepreneurs
Startup Relief for Entrepreneurs will be extended to the end of 2026. Additionally, the relief available has been increased from €700,000 to €980,000.
Changes to allowances - social welfare measures
-Fuel Allowance: €300 lump sum payment to recipients in November 2024.
-Living Alone Allowance: Additional €200 for recipients.
-Carer’s Support Grant and Disability Payments: €400 payment for recipients of Carer’s Support Grant, Disability Allowance, Blind Pension, Invalidity Pension, and Domiciliary Care Allowance in November 2024.
-School Support: Continued funding for School Transport fee reduction and State Exam Fee waiver.
-Student Contributions:
Reduction of student contribution fee by €1,000.
Once-off 33% reduction in contribution fee for apprentices in higher education.
Increase in Post Graduate Tuition fee contribution by €1,000 for student grant recipients.
-Student Assistance Fund: Additional funding to support students amid cost of living challenges.
A note from the CEO of Kinore, Larissa Feeney FCA
While that is welcome, for a lot of SMEs, particularly those in hospitality - this budget has done very little and may well contribute to further closures in that sector
Larissa is a Fellow Chartered Accountant (FCA) and is the CEO of Kinore, which specialises in company formation, company secretarial, annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland and the UK.
