Many have broadly welcomed the Irish Budget 2025, released on October 1st, 2024.

The Irish Budget 2025 outlines a comprehensive plan with key measures addressing the cost of living, taxation, social welfare, housing, and climate initiatives. A €2.2 billion cost-of-living package includes €250 energy credits and increases to various welfare payments. Weekly payments, including pensions, will rise by €12, with lump sums like a €300 fuel allowance and €400 support grants.

Income tax:

The standard rate income tax band has been raised by €2,000 to €42,000. The Universal Social Charge (USC) decreases for the second time in a row, with a cut from 4% to 3% on incomes of €25,000 to €70,000. The entry threshold to 3% rate will increase by €1,622 to €27,382. Changes like wider tax bands, lower USC rates, and a higher minimum wage are set to increase take-home pay for many people.

Small benefits exemption:

Under the revised rules, employees can now receive up to five non-cash benefits annually, up to a cumulative limit of €1,500. his replaces the old system allowing just two tax-free non-cash benefits per year, capped at €1,000 total.

The new scheme allows employers to offer their staff multiple smaller tax-free benefits (such as gift vouchers) over the year. This increases the total amount employees can receive without being subject to income tax, PRSI, or USC. This change is part of broader efforts to enhance employee benefits and alleviate some of the pressures from inflation and cost-of-living increases.

Housing:

The government has introduced a significant increase to the rent tax credit—from €750 to €1,000 for individuals and €2,000 for jointly assessed couples—to help ease housing costs. The Help-to-Buy scheme is extended until 2029, alongside a boost in mortgage interest relief which is extended to 2025. The government is extending the Mortgage Interest Tax Credit introduced in Budget 2024 for taxpayers paying qualifying home loan interest. The relief calculates the difference between the interest paid in 2024 and the amount paid in 2022. The value of the credit and all qualifying criteria remain unchanged.
From November, the Vacant Homes Tax will rise from five to seven times a property’s local property tax rate. In addition, the government has increased stamp duty on high-value and bulk residential purchases to help moderate housing prices.

Inheritance taxes:

The lifetime tax-free thresholds are increasing across the different beneficiary groups:

• Group A (typically covering children inheriting from parents): The threshold has increased from €335,000 to €400,000.
• Group B (covering inheritances from siblings, nieces, nephews, and grandchildren): The threshold has risen from €32,500 to €40,000.
• Group C (covering more distant relatives or unrelated individuals): The threshold has increased from €16,250 to €20,000.

These changes aim to provide relief to families facing significant tax burdens when passing on assets, especially amid rising property values. Agricultural relief rules now require donors to meet a six-year active farming test for beneficiaries to qualify for relief.

Pensions:

The widely anticipated Automatic Enrolment Retirement Savings Scheme (AE) is to begin on 30 September 2025. Finance Bill 2024 will provide for the taxation of AE and will align with PRSAs, other than for employee contributions. As the State is making a top up for employees within AE there is no tax relief being provided for employee contributions.

No new pension changes were made, as the recent Standard Fund Threshold review includes proposals beginning in 2026. At a high level these include:

• Phased increases in the SFT of €200,000 per year beginning in 2026 until 2029 reaching €2.8 million and then converging the level of SFT with the applicable level of wage growth
• Both elements of the pension lump sum will remain at the current levels and not increase as future increases to the SFT are applied
• Rate of Chargeable Excess Tax is to remain unchanged at 40% for now, however a specific review of the rate is to take place by 2030

Tax on Investments:

Findings from the funds sector review will be published shortly, with next steps announced afterward.

 

Retirement relief: 

The upper age limit will rise from 65 to 70 to reflect current work practices. If the child or children retains the assets for more than 12 years, the CGT will be fully abated. Where there are disposals above €10 million within 12 years of receiving the assets, a clawback of the relief will apply.

On environmental policies, the government has increased the Carbon Tax and maintained the 9% VAT rate on gas and electricity until mid-2025. There’s also a continued focus on the transition to electric vehicles with tax incentives for green energy.

Further reading and links on the budget is available at Gov.ie.

Overall, the 2025 Budget reflects a balancing act of stimulating economic growth, providing relief for households, and pushing for sustainability and housing affordability.

Explore more of our insightful blog posts