Taxing Times

The Minister for Finance introduced the 2025 Budget on 1 October 2024. Further detailed measures will be included in the Finance Bill to be published on 10 October 2024.

Budget 2025 was framed by the minister as putting the country “on a firm footing for the future” while delivering benefits for workers and households, tackling the cost of living, stimulating indigenous entrepreneurship and maintaining our competitive edge.

The total budgetary package of €10.5bn was provided against a backdrop of a strong economy and unprecedented windfall receipts driven by the sale of the government’s shareholding in AIB and the EU Court of Justice judgement with respect to Apple. The minister acknowledged the need to utilise these receipts to deliver long-term value to the State and committed €3bn to infrastructure and to further investments of €4bn in 2024 and €6bn in 2025 to funds aimed at protecting against the risk of future economic shocks and supporting the green transition. The development by Q1 2025 of a framework for the further use of windfall receipts was also announced.

The tax measures announced amounted to €1.4 billion, and coupled with cost-of-living measures totalling €2.2bn, will be welcomed by households continuing to feel pinched finances.

Individuals can expect to benefit from the following changes announced in the Budget:

• An increase of €2,000 to the standard rate income tax cut off point to €44,000
• An increase in the ceiling of the 2% USC rate of €1,622 and a cut in the USC rate on incomes from €27,382 to €70,044 from 4% to 3%
• Increases of €125 in the personal, employee and earned income credits

In addition to measures aimed at tackling the housing crisis and driving sustainable change, the minister announced changes to the tax cost of passing assets to the next generation. The increase in the Group A CAT Threshold from €335,000 to €400,000 will ensure that many children inheriting the family home will be shielded from an inheritance tax charge. Full CGT relief should also be available for those under 70 where a transferred family business or farm is retained by the next generation for 12 years.

To support domestic entrepreneurship, the minister announced incremental improvements to existing reliefs for investments in SMEs and start-up companies. While these measures are to be welcomed, key factors that impact on an SME’s ability to scale and grow are access to risk capital and talent and there is scope for Ireland’s tax policy to better support indigenous business in these areas. 

Budget 2025 provides personal tax reliefs for workers and households, while making strides towards keeping Ireland’s tax system competitive. The announcement of reformation of taxation of foreign dividends and a review of the tax treatment of interest are welcome first steps towards simplification of Ireland’s corporation tax system. Tax certainty and simplification will become areas of increasing global competition in the coming years. It is hoped that further streamlining of the corporation tax system will be the subject of future Budgets.