Personal Tax
Key points
In the area of income tax, the following measures were announced:
- The standard band, taxed at 20%, for income tax is to be increased by €2,000 to an amount of €44,000 for each person.
- The 4% rate of USC will be reduced to 3%. This is the second year that the rate has been reduced. The entry threshold for the 3% rate rises by €1,622 to €27,382.
- The increase of various tax credits – personal tax credit, employee tax credit, earned income credit (by €125 each), home carer and single parent tax credits (by €150), rent tax credit (by credit (by €250), incapacitated child and blind persons tax credit (€300) and dependent relative tax credit (by €60).
- In the 2025 budget, there are incremental increases planned for all classes of PRSI (Pay Related Social Insurance). Specifically:
- Starting in October 2024, PRSI rates for employers, employees, and the self-employed will rise by 0.1%. A further 0.1% increase will follow in October 2025. These adjustments are part of a larger initiative to maintain the State Pension Age at 66.
- Mortgage interest relief will continue for one more year in respect of the increase in interest paid in 2024 compared to 2022.
- Stock reliefs for farmers that were due to expire at the end of the year have been extended to 2027 and agricultural relief for CAT has been curtailed by requiring that the donor is also subject to the six-year active farmer test.
- In terms of CAT, all group thresholds have been increased as follows;
- Group A: increased to €400,000
- Group B: Increased to €40,000
- Group C: Increased to €20,000
Businesses
Key points
The CGT retirement relief age limit will be increased from 66 to 70 years old, with a cap of €10m on proceeds/market value. Budget 2025 retains the upward change to the age limits and also introduces a clawback period of 12 years.
The reduced CGT rate for Angel Investors will apply to gains up to twice the value of the initial investment, with the limit extended from €3m to €10m.
The maximum relief available under the EII Scheme will be doubled from €500,000 to €1,000,000, and the relief under the SURE scheme will increase from €700,000 to €980,000.
The Start Up Exemption from corporation tax which allows a exemption from corporation tax for the first five years of trading for a tax liability of €40,000 per annum and restricted relief up to €60,000 will now take into account PRSI paid by owner-directors.
There will be an increase in the first year cash repayment of the R&D tax credit from €50,000 to €75,000, with a commitment to an ongoing review of the tax credit.
VAT Changes
Key points
The primary VAT change in the Budget is the extension of the 9% VAT rate for gas and electricity until 30 April 2025, which was initially set to revert to 13.5% after 31 October 2024.
Starting from 1 January 2025, the 9% VAT rate will also apply to the supply and installation of heat pumps, which are currently taxed at 23%, to encourage homeowners to install heat pumps as part of climate action measures.
The flat-rate addition for non-VAT registered farmers, which compensates them for the VAT they cannot reclaim on their expenses, will increase from 4.8% to 5.1%, effective from 1 January 2025.
The turnover threshold limits for goods and services at which businesses must register for VAT will be raised from €80,000 and €40,000 to €85,000 and €42,500, respectively.
Stamp Duty and Housing
Key measures
The new 6% stamp duty rate will be applied to the portion of residential property transfers that exceed €1.5 million. The existing 1% rate will still apply to the first €1 million, and the 2% rate will apply to the value between €1 million and €1.5 million. It is intended that this new 6% rate will be applicable to the purchase of a single house or apartment, rather than an entire apartment block. This clarification is expected to be provided in the Finance Bill.
The existing rate of 10% on the purchase of 10 or more residential units to be increased to 15%.
Help-to-Buy Scheme is to be extended until the end of 2029.
In relation to Residential Zoned Land Tax an exemption is to be introduced in 2025 for landowners who seek to have their land rezoned to reflect the genuine economic activity they carry out on their land.
Pre-Letting Expenditure on Vacant Premises is to be extended for a further 3 years until the end of 2027.
The Vacant Homes Tax rate is to be increased from 5 to 7 times the existing LPT rate of the property.
Funding for infrastructure development is to increase by €3bm. Irish Water is to receive a €1bn for capital projects including residential development connections and sewage pipe improvements. The Land Development Agency is to receive an additional €1.25bn to fund the delivery of affordable homes. A further €0.75bn is to be invested to improve the electricity grid to ensure capacity is available for future residential and commercial developments.