With less than three weeks to Budget Day, Finance Minister, Jack Chambers, has considered the submissions from the various Senior Ministers in order to draft, what is expected to be a “Giveaway” 2025 Budget, in an attempt to win favour with Voters.
The Cost of Living Crisis has continued to leave families struggling and although inflation is easing, this has not reached consumers or businesses to date.
It is thought that the tax package in the Budget will mainly be used to offset increases in inflation and also fund a Cost of Living Package, social welfare increases and include a “Significant” Income Tax and USC Reduction Package. The Minister has stated that any once-off measure are expected to be lower than those in prior years.
Current Personal Tax System
The Irish Personal Tax system is seen as being a progressive system, albeit complex and onerous to administer. It ensures the burden of tax is on those with the ability to pay, with 25% of the total Income Tax receipts being from high earners.
Whilst many people are aware that the top rate of Income Tax is 40%, the effective marginal rate, once PRSI and USC are included, is up to 52% for employees. An additional 3% USC “surcharge” applies to those who are self-employed with income over €100k, which is an inherent inequity in the system.
Changes to any of the High-Income Sectors may have a significant impact on public finances. This bears the question as to whether there is an excessive burden on high level earners.
In order alleviate this, the Government could consider various calls to simplify the system and widen the tax base so that everyone of working age who can work would be liable to Income Tax.
This would not be achieved in one Budget and any changes would need to consider whether there are knock on effects for work incentives, our competitiveness and the ability to attract and retain inward investment and highly-skilled workers.
Given that Income Tax Receipts make up just over 37% of the Total Exchequer Receipts, unless new income streams are identified, it is unlikely that there will be any significant tax measures introduced.
However, any new measure that reduces that burden without further complicating the system must be welcomed.
Tax Bands and Tax Credits
It is expected that the tax measure will be similar to last year – increases to the Standard Rate Tax Band, which was increased to €42,000 last year, as well as marginal increases to some of the main Personal Tax credits, in line with inflation, this may include an increase to the Rental Tax Credit. There are also proposals for the introduction of tax breaks for Donations to local sports clubs and a Youth Tax Credit.
In addition, there may be a cut to the USC rate – it is unlikely that this will be in the form of the abolition of the additional USC surcharge of 3% applied to the Self-Employed earning over €100k.
Other Measures
The Budget is also thought to include similar measures as previous years, such as Double Social Welfare payments and a Cost of Living Package, to include energy credits as announced in previous Budgets. The full detail of which will be announced on Budget Day.
Over the next few weeks in the lead up to Budget 2025 #RBKtax will look at potential tax measures that the Government could consider and provide insights into Budget 2025.
Budget Briefing Hybrid Event
RBK will be holding its annual Breakfast Budget Briefing as a hybrid event in person at the Athlone Springs Hotel in Athlone and streaming live online on Wednesday, 2nd October. Mike Scanlan, Tax Director, RBK will be analysing the tax measures announced in Budget 2025 and David McNamara, Chief Economist with AIB will look at the economic outlook.
Registration Options:
Contact Us
For more advice and support or to discuss personal taxes, please contact a member of the RBK Tax Team:
Lucy Jo McHugh - Tax Manager - (090) 6480 600
