Last updated: 02 Oct 2024 11:00 Posted in: AIA
The Government of Ireland has unveiled Budget 2025, its plan to address cost-of-living pressures, taxation, housing, and social welfare enhancements. This budget introduces key changes that will impact AIA members both personally and professionally, with significant benefits across various sectors.
Minister for Finance Jack Chambers argued that Budget 2025 demonstrates a strong commitment to addressing immediate financial pressures while laying the groundwork for long-term economic stability, supporting individuals, businesses, and key sectors across Ireland.
The measures announced on Tuesday 1 October 2024 by the Minister for Finance and the Minister for Public Expenditure, NDP Delivery and Reform include:
Cost of Living and Energy Relief
Budget 2025 includes two €125 electricity credits, one to be paid this year and another in 2025, to alleviate rising energy costs. The 9% VAT rate on electricity and gas bills will be extended until April 2025. Additionally, the minimum wage will rise by 80 cents to €13.50 per hour from January 2025, improving income for workers across Ireland.
Business and Employment Supports
Budget 2025 includes several measures designed to support businesses. The tax-free limit for non-cash employee benefits, such as vouchers, will increase from €1,000 to €1,500. The Research and Development (R&D) tax credit will also be enhanced, encouraging innovation. A €170 million energy subsidy scheme will benefit 39,000 firms, helping to offset energy costs.
Tax Changes and Personal Reliefs
Personal tax adjustments are a cornerstone of the budget. Personal, employee, and earned income credits will increase by €125. The income threshold for the higher 40% tax rate will rise by €2,000 to €44,000, reducing tax burdens for many individuals. Additionally, the Universal Social Charge (USC) will be cut from 4% to 3%, further easing financial pressure. Inheritance tax thresholds will also increase, offering relief to those planning their estates.
Social Welfare Increases
For social welfare recipients, weekly payments will increase by €12, while payments for qualified children will see additional rises of €4 for children under 12 and €8 for those over 12. A series of one-off payments will provide further support, including a €400 lump sum for working families, €300 for those on fuel allowance, and a €200 payment for those living alone. Carers will benefit from a €150 increase in the Carer's Support Grant, alongside increases in the carer's allowance disregard.
Housing and Renters’ Relief
Housing remains a focal point of Budget 2025, with €3.2 billion in capital spending allocated to social and affordable housing initiatives. The Help to Buy scheme has been extended to 2029, offering continued support for first-time homebuyers. Renters will see the annual rent tax credit increase by €250 to €1,000, a measure set to remain in place for 2025. New taxes aimed at bulk property buyers and vacant homes are also introduced to promote housing availability.
Healthcare and Education Investment
Healthcare receives a boost, with funding allocated for 495 new hospital beds and increased mental health services. Schools will benefit from expanded hot meal programmes and free schoolbooks for senior students. A €1.5 billion investment in higher education and research aims to strengthen Ireland’s knowledge economy.
Climate and Environmental Measures
As part of the government’s climate agenda, the carbon tax will increase for petrol and diesel from October 2025. For other fuels, the tax hike will take effect in May. The VAT rate on heat pumps will drop from 23% to 9%, encouraging the adoption of energy-efficient home systems.
David Potts, AIA Director of Policy & Regulation, said, "Budget 2025 strikes a balance between supporting economic growth and addressing the rising cost of living. Whilst the measures announced within the budget included some positive changes to the tax framework for businesses, including expansion of the R&D tax credit and extensions to certain investor reliefs, their effect on small and medium enterprises and practitioners may be limited and further support is needed to address rising overheads."
To understand what these announcements mean for you and your clients, register for AIA’s Irish Budget webinar on Friday 4 October here.
Full Details on measures announced