Here’s everything you need to know about Budget 2025

The Government finances have arguably never been in a better position.

Economic growth is strong, corporate tax receipts continue to pour in, employment is at record levels, and to top it all off the coffers have been bolstered by a massive €14 billion Apple windfall.

And with a general election on the horizon, expectations for a generous Budget were high. And the Government didn't disappoint with something for almost everyone. Though with inflation on the wane, critics will no doubt question the scale of the spending.

As in previous years, many of the announcements had been leaked well in advance meaning Jack and Paschal could probably have saved themselves a trip to the Dáil!

But in case you missed it, here's a look at the main measures and what it all means for your pocket.

Income Tax and USC

Income tax bands and tax credits were increased to help workers keep more of their money.

• The PAYE/Employee Tax Credit and the Personal Tax Credit will both increase by €125 to €2,000 i.e. €4,000 in total. Tax credits sound complicated but they're not. They simply reduce your tax liability by the size of the tax credit. So this will save most PAYE workers €250 a year or almost €21 a month. It also means workers now won't pay any income tax on the first €20,000 of their income, which is quite high by international standards.
• The point at which people start paying the top 40% rate of income tax will increase by €2,000 to €44,000 for a single person, however this is still quite low by international standards. For example the equivalent cut-off rate in the UK is over €60,000. Anyone earning over €44,000 a year will benefit fully to the tune of €400 a year or just over €33 a month. The cut-off point for married, one-earner couples will rise by a similar amount to €53,000.
• The 2% USC band will increase from €25,760 to €27,382 to take account of the recent increase in the minimum wage to €13.50. Anyone earning over €27,382 will benefit fully by around €33 a year or almost €3 a month. 
• The 4% USC rate will be cut to 3%. Depending on how much you earn, this measure will save you up to around €427 a year or around €35 a month.  
• The Earned Income Tax Credit for the self-employed will also increase by €125 to €2,000.
• The Home Carer Tax Credit will increase by €150 to €1,950.
• The Incapacitated Child Tax Credit will increase by €300 to €3,800.
• The Blind Tax Credit will increase by €300 to €1,950. This is the first increase to this credit in several years.
• Income tax and employee PRSI rates will remain the same. But all PRSI rates have been increased by 0.10% from October 2024.

Energy 

All the main energy suppliers have announced moderate price decreases over the past year. However prices still remain well above normal levels. So further help with energy bills had been expected.

A new €250 energy credit will be paid to all households' electricity accounts in two equal instalments of €125. One payment will be made before Christmas, and one after. You can read more about how the new credit will work here.

The reduced 9% rate of VAT on gas and electricity bills is also being extended for another six months until the end of April.

Households in receipt of the fuel allowance will receive an extra lump sum of €300 in November in addition to their regular weekly payment. See here for more information on the allowance and how to apply for it.

The rate of VAT on the installation of heat pumps is being reduced to 9%.  

The Carbon Tax

The Government has already committed to increasing the carbon tax to €100 per tonne by 2030 so another increase in the tax was almost a forgone conclusion.

Carbon tax will increase by a further €7.50 to €63.50 per tonne of CO2 from 9th October.

This will increase the price of a litre of petrol and diesel by around 3 cent. However the increase on home heating fuels like gas won't kick in until May.

So what exactly does that mean for your pocket?

Below is an approximate outline of what the tax increase will add to various fuels, as well as the total amount now being paid in carbon tax.

*Based on average annual consumption of 11,000 kWh of gas

**40kg bag

**Based on 900-litre tank

Inheritance Tax

Inheritance tax has become an increasingly controversial topic in recent years as ever-rising property prices are leaving children with hefty tax bills if they inherit the family home. 

How much someone can inherit tax-free depends on their relationship to the person giving the gift and is divided into three groups/thresholds: A, B and C. 

All thresholds are being increased. 

Additionally, employees can now receive a tax-free voucher/gift of up to €1,500 a year from their employers under the Small Benefit Exemption. This is up from €1,000 at present and just €250 a few years ago.  

Social Welfare 

There will be an across-the-board increase in social welfare payments. The State Pension, Jobseekers’ Allowance and other welfare payments will increase by €12 a week from January.  

The Christmas Bonus will be paid to social welfare recipients in early December. And there will also be a double payment to most welfare recipients in October. 

On top of this, there will also be one-off, extra cost-of-living payments.

• There will be an extra Child Benefit payment in November and December, worth €140 each per child.
• A one-off €400 payment will be made to carers and those on Disability Allowance.
• Those in receipt of the Living Alone Allowance will receive a one-off €200 payment. 
• Those in receipt of the Working Family Payment will receive a one-off €400 payment.
• Those in receipt of the Invalidity Pension will receive a one-off €400 payment. 

If you're unsure of any welfare assistance that you might be entitled to, check in with your local welfare office over the coming days.

Housing

The main announcements were: 

• The Help-to-Buy scheme for first-time buyers, which allows for a tax rebate of up to €30,000 to help towards a deposit, has been extended until the end of 2029. You can find out more about the scheme here
• The rent tax credit, recently reintroduced, is being increased to €1,000. A tax credit simply reduces your tax liability by the size of the credit. So most renters will in essence be given a €1,000 refund on their annual rent. However to claim the credit your landlord must be registered with the Residential Tenancies Board (RTB).
• Homeowners who have seen their interest rate increase will be able to avail of mortgage interest relief. Introduced last year, the relief has been extended for another year. Tax relief of 20% will apply on the increase in the interest paid on a mortgage between 2023 and 2024, up to a maximum of €1,250. So if the interest on your mortgage has gone up by €250 a month (or €3,000 a year) you'll be able to claim €600 i.e. 20% of €3,000. The relief will only apply to those with a mortgage balance of between €80,000 and €500,000. Homeowners can apply for the support through Revenue’s Online Service. You can read more about the new measure here.  
• A new 6% rate of stamp duty will apply to houses over €1.5 million which is being dubbed as the 'mansion tax'. 

The 'Old Reliables'

It hasn't been a good Budget for smokers (is it ever?).

The excise on a packet of cigarettes is increasing by €1, bringing the price of a pack of 20 cigarettes up to over €18. A tax on vapes is also set to be introduced next year at a rate of 50 cent per millilitre. This will increase the price of a typical disposable vape from around €8 to €9.25.

The excise on petrol and diesel has remain unchanged again this year. However an increase in the carbon tax as outlined above means the price at the pump will still rise.    

The excise on alcohol has also remained unchanged. However the introduction of minimum unit pricing on alcohol in 2022 has already seen the price of cheaper alcohol increase significantly.

Education

The main announcements were: 

• The Hot School Meals Programme, which provides school children with one free hot meal a day, will be extended to all remaining primary schools in 2025. 
• The provision of free secondary school books is being extended to senior cycle students. This builds on the free books for primary school children and junior cycle students that have been introduced in recent years. However it won't apply to students attending fee-paying schools.
• The fees for State school exams will be waived for next year.
• The €1,000 reduction in the Student Contribution Charge for third-level students will continue for the 2025/26 academic year.

Transport 

• Free public transport is being extended to include children between the ages of 5 and 8. 
• A new pensioner pass will allow over 70s to bring a friend with them on public transport for free, which is aimed at tackling social isolation.

Don't forget...

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