Budget 2025: Highlights for you and your business
Budget 2025 was announced by the Minister for Finance and the Minister for Public Expenditure and Reform yesterday afternoon. Against the back-drop of the ongoing cost of living crisis and an expected upcoming election, it’s clear that this budget attempted to give something to everyone. We have set out below a high-level summary of the tax measures which may be relevant to you and your business. As always, please do contact us if we can offer any advice or assistance in relation to any tax measures which may be of benefit to you.
Changes for you and your family
Increase in bands & credits
As widely reported prior to the Minister’s speech, generous increases to personal tax bands and credits were announced. Below is an overview of the changes expected to affect most taxpayers.Increase in the tax-free thresholds for CAT
While there was no change in the rate of CAT, increases to the tax-free thresholds were announced with effect from today, 2 October 2024. The new thresholds are listed below:- Group A Threshold: €400,000 (increased from €335,000)
- Group B Threshold: €40,000 (increased from €32,500)
- Group C Threshold: €20,000 (increased from €16,250)
Increase in the Standard Fund Threshold for Pension Funds
Although not included in yesterday’s Budget announcements, the Department of Finance announced last week that the current Standard Fund Threshold (“SFT”) of €2,000,000 is to be increased at €200,000 per annum over a four-year period from 2026 to 2029. We await the publication of the Finance Bill 2024 to see if any changes are made to the tax relief available for employer pension contributions.Changes for landlords, tenants & property owners
The Help to Buy Scheme
The Help to Buy Scheme, which had been due to expire at the end of 2025, has been extended until the end of 2029 at its current enhanced rates. The longer period of extension is very welcome and should provide some certainty to first time buyers intending to buy a new build in the coming years.Mortgage Interest Relief
The mortgage interest tax relief which was announced in last year’s budget has been extended for one further year given the impact of high interest rates on households. Similar to last year, taxpayers are required to comply with Local Property Tax (LPT) regulations. Mortgage interest relief can be claimed at the standard income tax rate of 20%. This relief will apply to the increase in interest paid in 2024 compared to the interest paid in 2022. The maximum amount eligible for relief is €6,250 per residence, resulting in a maximum tax credit of €1,250. To claim Mortgage Interest Relief, taxpayers must submit a tax return to Revenue. The relief will be applied as a credit against the taxpayer’s income tax liability for 2024.Rent tax credit
This credit will increase to €1,000 (or €2,000 for jointly assessed taxpayers) for the tax years 2024 and 2025.Pre- letting Expenses
Currently there is a deduction (capped at €10,000 per premises) from rental income for certain pre-letting expenses. This relief has been extended for a further three years, to 31 December 2027. It provides that certain expenses incurred on a vacant residential premises prior to it being first let after a period of non-occupancy (pre-letting expenses) are authorised as a deduction against rental income from that premises. The deduction is capped at €10,000 per vacant premises.Vacant Homes Tax
The rate of the Vacant Homes Tax has once again been increased, now from five times to seven times a property’s base Local Property Tax liability. This increase will take effect from the next chargeable period, commencing 1 November 2024.Residential Zoned Land Tax
The Residential Zoned Land Tax (RZLT) will be charged each year from 1 February 2025 on land that is zoned for residential use and has access to necessary services such as water supply, roads and lighting. It will be calculated at 3% of the market value of the land in scope. Provisions are to be included in Finance Bill 2024 to provide opportunities for RZLT landowners to seek a change in zoning in 2025 to a zoning which reflects the economic activity they undertake on the land. Guidelines will issue to local authorities indicating that they should consider and accommodate rezoning requests where landowners seek to continue undertaking existing economic activity.Stamp Duty
With effect from 2 October 2024, a third rate of stamp duty on residential properties will apply where the value or acquisition price exceeds €1.5 million. It will apply at a rate of 6% on the balance of the consideration in excess of €1.5 million. Transitional measures are to apply to transactions already in progress.Stamp Duty Rate on bulk acquisitions of houses
Also with effect from 2 October 2024, the Stamp Duty rate applied where 10 or more houses are acquired in any 12-month period is being increased from 10% to 15%.Changes for employers
Increase in the national minimum wage
As of 1 January 2025, the national minimum wage is increased by €0.80 per hour to €13.50 per hour.BIK on motor vehicles
The temporary measures originally introduced in March 2023 to mitigate the increased tax costs arising from the emissions-based operation of BIK on employer provided motor vehicles has been extended to 31 December 2025. The temporary measure reduces the original market value of employer provided vehicles in the CO2 emissions-based categories A, B, C and D by €10,000. This reduction extends to commercial and electric vehicles also.-
A BIK exemption is also to be introduced where an employer incurs expenses in relation to the provision of facilities to charge electric vehicles at the home of employees and directors.Small Benefit Exemption
The overall limit on the annual value of any tax-free benefits provided to employees is to increase from €1,000 to €1,500 and will be aggregated over the first five individual benefits granted annually, previously this was the aggregate value of the first two benefits. As before, any benefits granted to employees under this exemption cannot be in the form of cash.Changes for your business
R&D tax credit
The year one payment threshold for an R&D tax credit claim, which allows for qualifying claims to be paid in full, is being increased from €50,000 to €75,000. This increase will accelerate the refunds available for smaller R&D projects, thereby giving an immediate cash flow benefit to a substantial proportion of claimant companies and companies claiming the credit for the first time.Start-up Relief for New Companies
The method by which start up relief for new companies is calculated is being extended to include class S PRSI paid by company owner-directors up to maximum of €1,000 per individual. This change will assist qualifying new companies in fully utilising this relief.Capital allowances
The current accelerated capital allowances scheme for gas and hydrogen-powered vehicles and refuelling equipment is to be extended by a further year to 31 December 2025.-
The CO2 thresholds effecting the overall cost allowable when claiming capital allowances on motor vehicles are being decreased due to the overall improvement of vehicle emission standards in the motor industry. From 01 January 2027, the following limits on allowable expenditure will apply:- €24,000 for vehicles with CO2 Emissions between 0-120g/km,
- €12,000 for vehicles with CO2 Emissions between 121-140g/km,
- €0 for vehicles with CO2 Emissions in excess of 141g/km.
Participation Exemption for Foreign Dividends
From 1 January 2025, a new participation exemption for foreign dividends is being introduced to offer an alternative method of accounting for double tax relief, from the current “tax and credit” approach, for Irish companies receiving dividends from subsidiaries in the EU/EEA and jurisdictions with which Ireland has an existing double-taxation agreement.-
The participation exemption is not mandatory and may be claimed by way of an election in a company’s annual corporation tax return. We await details of this exemption to be published in the upcoming Finance Bill.VAT
From 1 January 2025, the VAT registration turnover thresholds will increase from €40,000 to €42,500 for services and from €80,000 to €85,000 for goods. This change will assist businesses currently sitting outside of the VAT thresholds to remain there. Suppliers whose turnover is below the threshold may elect to register.Changes for entrepreneurs & investors
CGT Retirement Relief
As you may recall, Budget 2024 previously introduced an upper limit of €10m on retirement relief which may be available on transfers from parents to children where the parent was aged up to 69. This change was to apply to transfers on or after 1 January 2025. Previous to this, no upper limit had applied to retirement relief on qualifying transfers.-
In Budget 2025, the Government has decided to partially roll back on this limit and it has been announced that no limit will be imposed, provided that the children retain ownership of the assets acquired for a 12 year period. Although welcome, the proposed length of the clawback period appears excessive – particularly, given the potential age profile of the children at the time of the transfer from the parents. We await to see if any further changes are proposed as the Finance Bill goes through the committee stages.Angel Investor Relief
Although the new Angel Investor Relief was announced in Budget 2024, the commencement of the relief was subject to a Ministerial Order which has not yet been issued. The Minister for Finance announced yesterday that the previously announced lifetime limit for this relief is to be increased from €3m to €10m. As a note of caution, we understand that there are onerous conditions to be satisfied in order to avail of this relief. Time will tell if this relief will actually be available to many investors.Relief for investment in corporate trades
An extension of the reliefs available under the Employment Investment Incentive (EII), Start-Up Relief for Entrepreneurs (SURE) and Start-Up Capital Investment (SCI) has been announced for a further two years to 31 December 2026. Increases in the level of relief available for both EII and SURE have been announced.Farming & agricultural relief
The following measures were announced to support the Irish agricultural sector.- Farmers who carry on their farming business through a company can now avail of the stamp duty relief in respect of farmland leases for periods between six and thirty-five years.
- General Stock Relief, Young Trained Farmer Stock Relief and Stock Relief for Registered Farm Partnerships have all been extended to 31 December 2027.
- The Young Trained Farmer Relief will also be amended so that it is available to a farmer who carries on their farming business through a company.
- A 50% rate of wear and tear allowances has been introduced for the purchase of certain farm safety equipment and adaptive equipment for farmers with disabilities. The scheme will also cover equipment under the Targeted Agriculture Modernisation Scheme.
- Amendments have been made to Agricultural Relief. The six-year active farmer test is to be extended to the person who provides the gift or inheritance.
Other measures
The following measures were also mentioned by the Minister:- The temporary reduction in the VAT rate for electricity and gas of 9% is being extended to 30 April 2025.
- The VAT rate on the installation of heat pumps is to be reduced from 23% to 9%.
- The flat rate addition for farmers is being increased from 4.8% to 5.1% from 1 January 2025.
- Excise Duty on the packet of 20 cigarettes will increase by €1 with a pro rata increase on other tobacco products.
- A tax of 50c per ml of e-liquid is to be introduced from mid-2025, subject to ministerial commencement order.
- Changes to the tax regime in respect of donations made to sporting bodies are expected to allow PAYE individuals or self-assessed individuals to choose if the income tax relief can be claimed by the sporting body or the individual making the donation.
- Carbon Tax will increase from €56 to €63.50 per tonne of carbon dioxide emitted from petrol and diesel from 9 October 2024. The increase will apply to other fuels from 1 May 2025.
- VRT relief has been amended so that commercial battery electric vehicles can qualify for the €200 VRT rate.
- The Motor Insurers Insolvency Compensation Fund levy will be reduced to 0% for policies renewed from 1 January 2025.