Personal tax insights – Finance Bill 2025

Given the minimal changes to personal tax announced in the Budget, it will come as no surprise that there were relatively few specific personal tax measures included in Finance Bill 2025. However, the Bill did include some technical amendments in addition to those measures announced on Budget Day.

Key measures include adjustments to the universal social charge, extensions to rent and mortgage reliefs, changes to investment taxation, and updates to exemptions for charitable and sports bodies, among others.

Cian Liddy

Partner

KPMG in Ireland

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Universal social charge

On Budget Day, the minister announced that the minimum wage will increase from 1 January 2026 to €14.15 per hour and that in keeping with prior years, there would be a corresponding increase to the ceiling on the second rate of USC (2%) to ensure that workers on the new minimum wage do not see the benefit eroded by higher rates of USC. The new upper limit for the 2% rate will be €28,700, an increase of €1,318.

In addition, the concession applying reduced USC for full medical card holders under 70 years of age whose individual annual income does not exceed €60,000 will be extended for a further two years until the end of 2027.

Rent tax credit

The rent tax credit will be extended for three years to 31 December 2028. The value of the credit, and the conditions to qualify for the relief, remain unchanged.

The rent tax credit is capped at €2,000 per year for jointly assessed married couples or civil partners, and €1,000 per year for single persons.

Mortgage interest relief

The Bill provides for the extension of mortgage interest relief until 31 December 2026. This tax credit is for taxpayers who have made interest payments on a mortgage for their principal private residence. The relief is available to homeowners who had an outstanding mortgage balance between €80,000 and €500,000 on 31 December 2022.

For 2025, the relief will be calculated based on the increase in interest paid in 2025 compared with the interest paid in 2022. The amount qualifying for relief at the standard rate of tax (20%) is capped at €6,250 per property i.e. maximum benefit of €1,250.

For 2026, the relief will be reduced and will be calculated based on 50%of the increase in interest paid in 2026 compared with interest paid in 2022. The amount qualifying for relief at the standard rate of tax (20%) is capped at €3,125 per property i.e. maximum benefit of €625.

Taxation of certain investments and life assurance policies

The Bill includes the provisions required to effect the reduction in tax rate from 41% to 38% on income and gains from certain investments and life assurance policies from 1 January 2026, including:

Domestic life assurance policies,
Certain foreign life policies,
Irish domiciled investment funds, and
Equivalent offshore funds in other EU Member States, EEA States and OECD countries with which Ireland has double tax agreements.

In his Budget speech, the minister stated his intention to publish a roadmap early in 2026 to set out his intended approach to simplify and adapt the tax framework to encourage retail investment (referencing recommendations from the European Commission on Savings and Investment Accounts).

We look forward to publication of the roadmap and providing input to the resulting measures for future Finance Bills.

Tax exemptions for charitable and sports bodies

The Finance Bill provides that income arising after 1 January 2026 by charitable and sports bodies will only be considered exempt from tax if Revenue have expressly approved an exemption before the income arises.

Any bodies in this space who have not yet applied for their exemption or have let it lapse would be well-served by making the necessary application to Revenue in early course.

Donations to certain sports bodies

Various administrative changes are being made to the scheme for tax relief on donations to certain sporting bodies and sports’ national governing bodies, including:

An individual’s decision on whether to claim tax relief themselves or allow the sporting body to claim the relief is to be irrevocable,
Donors must provide the “approved project number” and a “unique receipt number” to Revenue when claiming a deduction, and
A donation will not impact the calculation of tax relief for pension contributions.

In addition, the Bill aligns the treatment for USC purposes of donations to national governing bodies with donations to other sports bodies i.e. such donations are not deductible for USC purposes.

Revised entrepreneur relief

The lifetime limit under revised entrepreneur relief is to be increased from €1 million to €1.5 million. Revised entrepreneur relief reduces the CGT rate to 10% on gains from the disposal of qualifying business assets. The increased limit is to apply to disposals on or after 1 January 2026.

Helpfully, the Finance Bill confirms that the revised €1.5 million limit can also benefit those who had previously availed of relief. For example, an entrepreneur who realised a gain in excess of €1 million on a prior disposal but had their relief capped by the then-applicable limit, should be entitled to benefit from a further €500,000 on a future disposal.

Business property relief

Business property relief is a CAT relief that reduces the taxable value of relevant business property by 90% where certain conditions are satisfied. The Finance Bill provides for two changes to business property relief for gifts/inheritances taken on or after 1 January 2026. The changes are as follows:

The value of ‘excepted assets’ is specifically excluded from benefiting from the relief. Currently, an asset will be an excepted asset where it was not used for the purpose of the relevant business for the whole of the two-year period prior to the gift/ inheritance.

Finance Bill 2025 provides that where an asset has not been used for the purposes of the business for that two-year period, relief will be available if, at the date of the gift or inheritance, the asset was required to be used for a specific purpose of the business within a period of six years from the date of the gift/ inheritance. A possible scenario in which this measure may apply is where a business accumulates cash reserves over a period of time for the purposes of funding a future expansion / capital project.

Where the asset is not subsequently used for this business purpose within this six-year period, there will be a rebuttable presumption that the business property relief given in respect of that asset should be clawed back.
A further change contained in the Bill relates to the clawback provisions applicable to business property relief. A clawback arises where property on which business property relief had been claimed is disposed of without being replaced by other qualifying property within a year of disposal. As an anti-avoidance measure, the Bill provides that if the proceeds for the disposal are less than market value, the clawback calculation will be by reference to the higher market value.

CAT on life assurance policies

Currently, where a life assurance policy is the subject of a gift or inheritance, a charge to CAT will not arise until one of the following events occur: (1) the policy matures, (2) it is transferred to the insurer for consideration, or (3) a payment is made under the policy.

Finance Bill 2025 introduces an amendment to provide that where a person receives a gift or inheritance of an interest in a life assurance policy and disposes of it before any of the events above occurs, a charge to CAT will apply at the time of disposal.

Direct debit payments

The Finance Bill proposes some changes to the provisions for payment of preliminary income tax by direct debit. The measures remove the requirement for the direct debit to consist of a set number of equal monthly instalments and the Explanatory Memorandum which accompanies the Bill explains that this is to facilitate variable direct debits in future.

It is expected that further guidance will be released by Revenue to explain how this will work in practice.

Get in touch

The measures unveiled in Finance Bill 2025 will have far-reaching implications for businesses across Ireland. If you have any enquiries, comments, or wish to explore further, we are here to assist.

Contact Cian Liddy of our Tax team today.