Finance Minister Jack Chambers revealed an €8.3bn Budget that comprises €1.4bn in tax cuts and €6.9bn in new spending
In a far-reaching Budget, key measures included:
- Auto-enrolment for pensions will be delayed until September 2025
- VAT rate for hospitality sector to stay at 13.5% despite calls from sector to reduce it
- There are plans to use the €14.1bn “Apple tax” to fund infrastructure such as water, electricity, transport and housing
- The Standard Rate Cut Off point for PAYE workers has been increased by €2,000 to €44,000
- A third rate of stamp duty, worth 6pc which will be introduced for properties worth over €1.5m
- Petrol: The total tax per litre will rise by 21.6%, from 85.85 cents in 2020 to 104.37 cents from October 2nd.
- Diesel: The tax per litre will increase by 27.4%, from 73.60 cents to 93.78 cents.
- Carbon tax rises by €7.50 per tonne on petrol and diesel from October 9, and on heating fuels from May 1, 2025.
- Amount an employer can give workers as bonus payments increases to €1,500
- €4,000 energy grant to cover cost of electricity for the retail and hospitality sector before Christmas
- Increase in the first year threshold in the R&D tax credit from €50,000 to €75,000
Budget 2025 reactions and insights
Angel and equity investment
Chair of Scale Ireland, Brian Caulfield:
“The Government’s continued support for our sector is welcome. The new relief for expenses incurred for listing on the Irish Stock Exchange is important and timely and may encourage more Irish companies to consider listing. The proposal to introduce a Stamp Duty exemption to enable Irish SMEs to access equity on financial trading platforms, subject to state aid rules, also sends a strong message.”
Alison McHugh, EY Ireland Head of Private Client Services:
“Angel investors are often the lifeblood of start-up or scaling businesses who may find it difficult to raise funding via traditional sources. As well as providing much needed finance, these investors bring a wealth of knowledge and experience that is invaluable to new business owners. The increase in the relief from €3m to €10m will further incentivise investors to invest in Irish indigenous business which are key to the growth of our economy.”
Capital Acquisitions Tax & R&D Tax Credit
CEO of Scale Ireland, Martina Fitzgerald:
“We welcome the continued strong focus on Irish tech start-up and scaling companies in Budget 2025. The cash flow of early stage companies will be directly affected by the increased cash refund in the first year of the R&D tax credit and we strongly welcome a further review of this next year. We also welcome the commitment to look at wider employee share options schemes next year.”
Michael Rooney, EY Ireland People Advisory Services Tax Partner:
“Capital Acquisition Taxes and particularly inheritance taxes can be an emotive issue for many, especially for those people who stand to inherit a home, a farm or a business from parents in the future. With house price inflation continuing to grow year on year, the last thing many young and not so young people want to do is have to pay the taxes on an estate they receive.
“In this context raising the CAT lifetime band to €400,000 is very welcome and at a cost of around €56 million to the Exchequer according to the Revenue Statistics Office is not very significant in the overall scale of the total Budget package. In fact, reducing the rate from 33% to 30% as well as increasing the band would have only cost €78 million in total and would have been of even more benefit.”
Alison McHugh, EY Ireland Head of Private Client Services:
“Changes announced in Budget 2025 in terms of Inheritance and Capital Acquisition Taxes will be welcomed across the country, in particular the increase in the Group A threshold for transfer within families to €400,000. Changes to the Group B and Group C thresholds go further than have been expected, however, as these bands have not increased in many years, this has been some time coming.”
Ian Collins, EY Ireland Head of Innovation Incentives:
“The decision to increase the 1st year refunds for the R&D tax credit to €75K will be very welcome for the SME sector in particular and offers much needed accelerated cashflow. Looking ahead, the Minister also announced a review of the R&D tax credit scheme this year.
“As competition for inward investment and Foreign Direct Investment intensifies globally, ensuring we have fit for purpose incentives will be key. In our experience, similar type reviews have often resulted in legislative improvements to help preserve and boost the attractiveness of Ireland as a hub for R&D. We welcome this intention and will play an active role in contributing to this review.”
Paschal Comerford, Tax Director, Grant Thornton:
“The introduction of a Participation Exemption on foreign dividends will be welcomed widely in the business sector. Ireland has been an outlier compared to our EU and OECD counterparts – the exemption will go some way in sustaining our position as a best-in-class corporate location in the face of intense international competition.
“The changes in R&D credit with an increase in the first-year payment threshold from €50k to €75K will be a welcome boost to small businesses carrying on R&D activities. While these changes will be widely welcomed by business – both domestic and international, it’s unfortunate that the rate was not increased beyond the 30% level, as called for in advance of the budget.”
Cost of living
Mary Moran, Tax Director, Grant Thornton Ireland:
“The Budget introduced a series of measures that will provide relief for households dealing with the hangover of the cost-of-living crisis. The standard rate band has been increased from €42,000 to €44,000 at the lower 20% rate of Income Tax, delivering a saving of €400 per individual where the band is fully utilised. An increase in the ceiling for the 2% rate of USC to €27,382 aligns this band with the increase in minimum wage to €13.50 per hour.
“This ensures those on the minimum wage will remain outside the top rates of USC. The 4.0% rate of USC has been reduced to 3%, and this is applicable to income between €27,382 and €70,044.
“This along with the €125 increase on the main annual tax credits, means that the average middle-income family – the JAM (just about managing) families with two incomes totalling €90,000 will be circa. €1,627 better off per annum. While this will be welcome to JAM families, the increase in PRSI introduced in last year’s budget will reduce the positive impact of the above by approximately €90 per annum.
“Renters will benefit from the increase in the rent tax credit, from €750 per year to €1,000 from 2025. There is additional good news in that the €1,000 figure will also now apply for 2024 to give an additional €250 back in the short-term.
“Other welcome measures announced include the electricity credit, which is in place for the third consecutive Budget. It will take the form of two payments of €125 this time around which will provide an early Christmas present in December and relief in the new year.”
“Mortgage Interest relief has been extended to 2024. Relief is given on the increase on mortgage interest between 2022 and 2024, there has been no reference in the Budget to a review of the mortgage balance of €500,000.
“It’s positive to see that the pre-letting expenses for landlords has been extended out to the end of 2027. However, it will be disappointed to landlords to see no change to the €10,000 limit or vacant period mentioned in the Budget.”
Electric vehicles
Geotab Vice President, EMEA, David Savage:
“Budget 2025 represents a missed opportunity for boosting Irish EV sales. On a day where SIMI data revealed that Ireland has seen year-on-year sales of zero emission vehicles decline for seven months in a row, there were hopes that, at the very least, grants towards the purchase of EVs would be restored to their previous levels. Unfortunately these hopes have disappeared in a puff of smoke, with Ireland’s fixation on high polluting vehicles set to continue.
“While there were some positives such as overhauling VRT categorisation for electric light commercial vehicles in line with calls by FTA Ireland and BIK benefits in terms of company cars and installation of home chargers, there was the opportunity to go further at a time when we need to see a rebound in sales of Electric Vehicles. For example, PwC recommended extending grants to the purchase of used EVs and Irish Rural Link’s pre budget submission called for a grant to help households upgrade their electrics which could support home charging.
“This is a real missed opportunity as reducing transport emissions is not only a key factor in achieving Ireland’s climate targets, but is also a crucial aspect of improving air quality. The EPA only highlighted last week the key role EVs have in tackling dangerous levels of nitrogen dioxide from vehicle emissions, with Ireland set to miss its health-based WHO air quality guideline targets in 2026.”
Michelle Dunne, Tax Director, Grant Thornton Ireland:
“An increase of €500 in the Small Benefit Exemption was announced in Budget 2025, whereby employers can provide up to 5 non-cash benefits in a year of up to €1,500. SMEs will particularly welcome this move as a way to reward employees in a tax-efficient manner.
“The temporary reduction of €10,000 to the original market value of company vehicles will be maintained for 2025 meaning employees, which is good news for employees who may have been expecting an increase in benefit in kind (BIK). The BIK exemption for e-vehicle charging points on business premises will now be extended to include the installation of home charging points. This is a common sense move and will be good news for those with electric vehicles, who were previously expected to fund their home charging facilities.”
Fuel tax
Kevin McPartlan, CEO of Fuels for Ireland:
“Today’s Budget claimed to focus on reducing the cost of living but the Government is actually increasing costs on consumer with its measures ensuring that Ireland is one of the most expensive countries in Europe for diesel and petrol. Since this government took office in 2020, the taxes on fuel have soared by 20%, driving a dramatic increase in costs for consumers and businesses.”
Green economy:
Emma Broderick, Partner and Head of Indirect Tax, Grant Thornton Ireland:
“The extension of 0% VAT rates to green economy initiatives, such as was applied to the domestic supply of solar panels in prior budgets, has proven very successful and progressive in supporting the transition to a green economy. The Minister today announced the introduction of a 9% VAT rate for the supply of heat pumps, which is expected to save the average customer about €750. Similarly, the Minister has announced measures to support the transition to electric vehicles by making further changes to VRT rates for commercial electric vehicles, aimed at removing competitive disadvantages in this area.
“The temporary 9% VAT rate for fuel, gas, oil and electricity has been extended for a further 6 months to 30 April 2025. Paired with energy tax credits of €250 announced by Minister O’Donoghue, this ‘cost of living’ headline support will be welcomed by households. However, the effective benefit is actually closer to €110 when planned increases to electricity network charges (of €100), and an increase to the Public Service Obligation (PSO) levy (of €40, both effective from the 1st of October) are taken into account.
Infrastructure investment
Fergal Kane – EY Ireland Strategy and Transactions Partner:
“The strong performance of the Irish economy over recent years after a sustained period of under-investment has led to significant infrastructural bottlenecks, which need to be tackled to ensure our economy remains competitive into the medium and longer term.
“The announcement of €3bn in ring-fenced funding for specific infrastructure investment in today’s Budget is hugely welcome, as we see Government’s on-going commitment to the development of all aspects of the country’s infrastructure detailed – including specific funding amounts outlined for housing, water and energy infrastructure.
“It will be important, however, to balance that investment against the limited spare capacity that exists in the economy to ensure it delivers value for money. This can only be achieved by also resolving the underlying issues that are impacting the country’s ability to deliver infrastructure at speed and at scale.”
Scaling businesses
Sarah Jane Larkin, director-general, IVCA:
“Budget 2025 has many measures which will enhance the environment in which businesses operate.
“The planned investment of over €1bn in the Department of Enterprise, Trade and Employment’s jobs, enterprise development, innovation and commercialisation and regulation programmes is a strong commitment to our enterprise sector.
“Increases in the limit to the R&D credit from €50K-€75K will be meaningful for early-stage knowledge intensive companies engaged in R&D activities and will have a very positive impact on cash flow at a critical point.
Changes to CGT (Capital Gains Tax) treatment for qualifying investments by angels, and doubling the EIIS relief “are very positive and will result in mobilising private capital to innovative SMEs. The measures on listing expenses are positive and a step in the direction of creating an Irish investment culture in productive assets”.
“While there was reference in Minister Chamber’s speech about future proofing the Irish economy, we strongly believe one of the best ways to achieve this is to broaden the capital base of institutional investment available to our indigenous companies. Increasing pension thresholds, while not enacting measures to encourage those institutional investors managing our pension savings to invest in the jobs of tomorrow is an opportunity missed.”
-
Bank of Ireland is welcoming new customers every day – funding investments, working capital and expansions across multiple sectors. To learn more, click here
-
Listen to the ThinkBusiness Podcast for business insights and inspiration. All episodes are here. You can also listen to the Podcast on:
-
Spotify
-
SoundCloud
-
Apple
