Top Highlights from Budget 2025
The budget takes place today, Tuesday, October 1st 2024 and the qualified accountants here at Tax Return Plus will be reviewing the budget announcements in detail and breaking down what it means for our clients.
Here is a detailed breakdown of the budget and what it means for you.
Income Tax
The Finance Minister has announced a change to the income tax band rates, with an increase in the standard rate income tax cut-off point by €2,000.
• From January, there will be a widening of rate bands for the 40% top rate of income tax by €2,000, changing from €42,000 to €44,000.
• If you are a Single Parent in receipt of the Single Parent Tax credit, your rate band will be increased from €46,000 to €48,000.
• Married couple/civil partners, one income – increase from €51,000 to €53,000, the balance will be taxed at 40%.
• Married couple/civil partners, two incomes – increased from €84,000 to €86,000, balance will be taxed at 40%.
Claire, A Chartered Tax Advisor with Tax Return Plus says: “This will mean an extra €400 in tax savings for the 2025 tax year for people paying the 40% tax rate.”
USC
Among the other 2025 Budget announcements, the 4% USC rate will be reduced to 3%. There will also be an increase in the second USC band rate from €25760 to €27382.
From January, USC will be calculated as:
• Income up to €12,012 will pay USC at a 0.5% rate
• Income from €12,013 – €27,382 will pay USC at a 2% rate
• Income from €27,382– €70,044 will pay USC at 3%
• Income over €70,045 will be taxed for USC at a rate of 8%
And those self-employed earning over €100,000 will be a 3% surcharge.
USC is a tax payable on your gross income. Depending on your circumstances, you pay USC at the standard rate or the reduced rate.
Claire says: “This is part of the continuing reduction in the USC rates for example there will be tax savings for those earning €36,000 by €119 compared to 2024”
Earned Income Tax Credit
The earned income tax credit which is specific to the self employed, will increase by €125 to €2,000 in line with the Employee Tax credit.
“It is great to see that this tax credit is well and truly embedded in the Irish tax system since its introduction in 2016. The credit brought the self-employed into line with employees who benefit from the Employee Tax Credit.” – Gerry, Tax Accountant with Tax Return Plus
Personal & Employee Tax Credit
Changes to Personal Tax credits and Employee PAYE credits – an increase of €125 from €1,875 to €2,000 will allow for a tax saving of €250.
Claire says – “This also means that people earning less than €20,000, will be below the threshold for paying income tax, USC will still be payable on those earnings”. See above those rates.
Home Carer Tax Credit
There will also be an increase in the Home Carer Tax Credit from €1,800 to €1,950 that will result in a tax saving of €150.
Incapacitated Child Tax Credit
The incapacitated child tax credit is also being increased from €3,500 to €3,800, resulting in another tax saving of €300.
Single Parent Tax Credit
There will also be an increase in the Single Parent Tax credit from €1750 to €1900 that will result in a tax saving of €150.
Rent Tax Relief
Rent Tax Credit increased by €250 and backdated to 2024. €1,000 for 2024 & 2025 per person, €2,000 for jointly assessed couple per year.
Gerry says – “This is a great boost for those renting, and for married couples also, worth €2,000. We also strongly encourage those who have children in 3rd Level courses and are paying for their accommodation to claim this credit – rent a room and digs type arrangements are also recognised tenancies for those students.”
Mortgage Interest Tax Credit
Extension of this credit which results in tax relief based on the increase in mortgage interest paid on your main home in 2022 compared to 2024.
Dependant Relative Tax Credit
This credit has increased by €60 per dependent relative up from €245 to €305.
Capital Acquitions Tax which covers inheritance tax and gift tax
Group A (Parent to Child) tax free threshold to increase from €335,000 to €400,000, with a proportioned increase in Group B threshold (Relative other than parent) to €40,000 & Group C (No Relation) to €20,000. This is the first time that this has been increased since 2019.
“The increase in the tax free thresholds for CAT are a welcome development and the first increases since 2019. Particularly in Group A, where the CAT threshold has not kept in line with rising house prices.” – Gerry Scully
VAT Thresholds
Last year saw the first increase in VAT exemption thresholds in many years and in Budget 2025, the Government have once again increased the VAT registration threshold to €42,500 and € 85,000.
Help- To-Buy-Scheme
The HTB Scheme has been extended from 2025 to 2029, meaning first time home buyers can claim a tax refund of up to €30,000 to help towards the purchase of their home.
Employer Small Gift Exemption
Increased by €500 up to €1,500 per year which can be made up of five payments compared to the previous two payments.
Flat Rate Payment to Retail & Hospitality
Retail and Hospitality business with rates bills of less than €30,000 will benefit from a payment of €4,000