The Minister for Finance Jack Chambers T.D. delivered Budget 2025 today with the stated intention that “We want our country to be an attractive place to live in, work in, raise a family and create jobs and opportunity - a foundation of real progress for the future”. This neatly sums up the focus of his budget with measures clearly aimed at making sure Ireland remains competitive in terms of attracting and retaining foreign direct investment, supporting households and families, providing supports for businesses and investing surplus funds for the benefit of future generations.

As regards some of the specific taxation measures introduced in the Budget, a summary is as follows:

Personal Taxes

• Income tax standard rate band to increase by €2,000 from €42,000 to €44,000 
• Increase of €125 in each of the personal tax, earned income and PAYE tax credit 
• Increase of €150 in the Home Carer Tax Credit and the single person child carer credit 
• Increase of €300 in the incapacitated child tax credit and the Blind tax credit and €60 in the dependent relative tax credit • Increase in the ceiling for the lower 2% rate of USC by €1,622 to €27,382 
• Reduction in the higher rate from 4% to 3% from 1 January 2025 
• Exemption from income tax, capital gains tax and capital acquisitions tax for payments made to women impacted by the failures under the CervicalCheck national screening programme

Capital Acquisitions Tax

Increase in the CAT thresholds as follows: 

• Group A from €335,000 to €400,000 
• Group B from €32,500 to €40,000 
• Group C from €16,250 to €20,000

Entrepreneurs and Business

• Increase in the annual small benefit exemption from €1,000 to €1,500 and extending the number of benefits from two to five that an employer can provide to an employee in a tax year 
• Introduction of a Participation exemption for foreign sourced dividends from 1 January 2025 
• Consideration over the next year on the introduction of a foreign branch exemption 
• Review of the tax treatment of interest with a view to reducing complexity in the tax code 
• Increase in the first year payment threshold in the R&D Tax credit from €50,000 to €75,000 
• Doubling the amount an investor can claim relief on under the EIIS relief from €500,000 up to €1 million
• Increasing the relief available under the Start-Up Relief for Entrepreneurs from €700,000 to €980,000 
• CGT relief targeted at investors in innovative start-ups that was announced last year to provide an increased lifetime limit on gains to which the relief applies from €3 million to €10 million. This relief, which was announced last year, will commence shortly. 
• Enhancing small company start-up relief from corporation tax by introducing a new method for companies to qualify for the relief by reference to Class S PRSI, extending the scope of the relief to small owner-managed start-up companies. 
• Relief for expenses incurred in connection with a first listing on an Irish or European stock exchange, subject to a cap of €1 million. 
• Two changes in relation to retirement relief coming into effect 1 January 2025. 
  • Retention of the upper age limit for the relief from 65 until the age of 70. 
  • Clawback of the relief where there are disposals by the child or children above €10 million within 12 years of receiving the assets. 
• In relation to the Benefit-in-Kind (BIK) regime for company cars, the Minister extended for a further year the temporary universal relief of €10,000 to the Original Market Value (OMV) which was first introduced in 2023. 
• Review of the complex Irish tax rules for deductibility of interest to be undertaken

VAT, Indirect Taxes and climate measures

• VAT registration thresholds for turnover above which businesses are required to register for and deal with VAT, are being increased by €2,500 for services and €5,000 for goods. This brings the registration thresholds to €42,500 for services and €85,000 for goods. 
• Extension of the current 9% VAT rate applying to supplies of gas and electricity. That is to continue to the end of April 2025. 
• The current 23% VAT rate on installation of heat pumps, is being reduced to 9%. The start date has yet to be confirmed. 
• The “flat rate” addition is being increased from 4.8% to 5.1% from 1 January 2025 
• The excise duty on a pack of 20 cigarettes is being increased by €1, to bring the price to €18.05. Similar pro-rated increases will apply to other packs. A charge on e-cigarettes (e-liquids) is to be introduced from mid 2025. This will increase the cost from a current level of €8, to €9.23. 
• Changes to Vehicle Registration Tax (VRT) rules for battery electric commercial vehicles (BEV) are being introduced to enable these qualify for a flat VRT amount of €200. 
• Emissions based measures are being introduced for VRT on “category B” commercial vehicles. Such vehicles with CO2 emissions of less than 120 g/km, will qualify for an 8% rate of VRT. 
• As set out in the Finance Act 2020, the current Carbon Tax rate per tonne on petrol and diesel, will increase from €56 to €63.50 from 9 October 2024. Rate increases on other fuels will take effect from May 2025.

Housing Initiatives

• Increase in the rent tax credit by €250 from €750 to €1,000 
• Extension of relief for landlords for pre-letting expenses by three years to the end of 2027 
• The Help to Buy Scheme to be extended to the end of 2029 
• Extension of mortgage interest relief that was introduced in Budget 2024 by one year 
• Increase the rate of stamp duty applicable to residential property valued above €1.5 million to 6% with effect from tonight. The existing rates of 1% and will continue to apply to values up to €1 million, and 2% on values above €1 million, with a third rate of 6% to apply to any value in excess of €1.5 million, with immediate effect. Normal transitional arrangements will apply for transactions in process. 
• Increase in the higher rate of stamp duty on bulk acquisitions of houses from 10% to 15% with immediate effect 
• Increase the rate of the Vacant Homes Tax from 5 to 7 times the property’s existing base Local Property Tax rate. The increase will take effect from the next chargeable period, commencing this November.

Agriculture

• Opportunities for landowners to avail of an exemption in 2025 from the Residential Zoned Land tax if they seek to have their land rezoned to reflect the activity they carry out on their land 
• Extension of general Stock Relief, Stock Relief for Young Trained Farmers and Stock Relief for Registered Farm Partnerships to the end of 2027 
• Revising the Young Trained Farmer Stamp Duty Relief so that it will be available where it is claimed by an individual farmer who carries on the farm business through a company. Amending the Stamp Duty relief which applies to farmers who lease land to also encompass farmers who have chosen to incorporate their business. 
• Amending agricultural relief for CAT purposes by extending the 6-year active farmer test to the person who provides the gift or inheritance. 
• As set out above, an increase in the flat rate VAT compensation scheme from 4.8% to 5.1% from 1 January 2025

Audio-visual sector

• A new tax credit for Unscripted Production will be available at a rate of 20% on qualifying expenditure of up to €15 million and, similar to the other audio-visual reliefs, projects will be required to pass a cultural test. This is subject to European Commission approval. 
• New 8% uplift, under the Section 481 film tax credit, again subject to State aid approval. This will apply to feature film productions with a maximum qualifying expenditure of €20 million

Overall, according to Mike Scanlan, Tax Director, RBK, the Minister has the extreme good fortune to inherit exceptionally strong finances and perhaps his biggest challenge in Budget 2025 was to show restraint. His focus on ensuring Ireland remains competitive in relation to foreign direct investment is very much welcomed and the introduction of a Participation exemption for foreign dividends is a big step forward.