Budget 2025: How does it affect me?

Budget 2025 took place on Tuesday October 1st.

Our qualified Tax Experts here at Irish Tax Rebates will be comprehensively reviewing the 2025 Budget announcements and their implications for our clients.

Budget 2025 Highlights for PAYE workers.

• The standard rate of income tax cut off point for the 40% tax band is to be increased, bringing the entry point from €42,000 to €44,000.
• The Rent Tax Credit will increase from €750 to €1000 for single taxpayers and €1,500 to €2,000 for married couples.
• The upper rate of the second USC band is to be increased from €25,760 to €27,382.
• This is part of the continuing reduction in the USC rates, with the 3rd band rate reducing from 4% to 3%.
• The mortgage interest tax credit will be extended due to the increased interest paid on mortgages between 2022-2024.
• The Help-to-Buy-Scheme will be extended till the end of 2029.
• Inheritance Tax Bands for Group A from €335,000 to €400,000. Group B to €40,000 and Group C €20,000.
• The PRSI rate in 2025 will be increased to 4.2%
• €125 increase in the Personal Tax Credit and Employee Tax Credit to €2,000.
• €150 increase in the Single Parent Tax Credit from €1,750 to €1,900.
• €150 increase in the Home Carers Tax Credit from €1,800 to €1,950.
• €300 increase in the Incapacitated Child Tax Credit from €3,500 to €3,800.
• €300 increase in the Blind Tax Credit from €1,650 to €1,950.
• €60 increase in the Dependent Relative Tax Credit from €245 to €305.

Income Tax

Universal social charge (USC)

From January, USC will be calculated as:

• Income up to €12,012 will pay USC at a 0.5% rate
• Income from €12,013 – €27,382 will pay USC at 2%.
• Income from €27,382– €70,044 will pay USC at 3%.
• Income over €70,045 will be taxed for USC at a rate of 8%.

USC is a tax payable on your gross income. Depending on your circumstances, you pay USC at the standard rate or the reduced rate.

Claire advises that: “This is part of the continuing reduction by the Government of the USC rates. For example there will be tax savings for those earning €36,000 of €119 compared to 2024’s USC Rates.”

PRSI

PRSI helps fund a range of social welfare benefits and services. This includes: pensions, unemployment benefits, health-related payments.

From October 2024, the PRSI rate increased by 0.1%, bringing the rate to 4.1% for 2025. A further increase of 0.1% is planned for October 2025. As a result the PRSI rate in 2025 will be 4.2%.

Personal Tax Credits

There will be changes to the Personal Tax Credit and Employee (PAYE) credit with an increase of €125 for each credit  – from €1,875 to €2,000 will allow for a tax saving of €250 for PAYE workers.

Claire advises that: “This also means that people earning less than €20,000, will be below the threshold for paying Income Tax. USC will still be payable on those earnings at 2%”.

Single Parent Tax Credit

The Single Parent Tax Credit is being increased from €1,750 to €1,900 –  that will result in a tax saving of €150.

Home Carer Tax Credit

There  Home Carer Tax Credit is being increased from €1,800 to €1,950 –  that will result in a tax saving of €150.

Incapacitated Child Tax Credit

The Incapacitated Child Tax Credit is being increased from €3,500 to €3,800, –  that will result in a tax saving of €150.

Dependent Relative Tax Credit

The Dependent Relative tax credit is being increased from €245 to €305 – that will result in a tax saving of €60.

Blind Tax Credit

The Blind Tax Credit is being increased from €1,650 to €1,950 – that will result in a tax saving of €300.

Rent Tax Credit

The Rent Tax Credit increased by €250 for 2025, which will also be backdated to the 2024 tax year. The credit will now be worth €1,000 for 2024 and 2025 for a Single Person and €2,000 for a Jointly Assessed couple.

“This is a great boost for those renting, and for married couples, meaning it will be worth €2,000 for 2024 and 2025. We also strongly encourage those who have children in 3rd Level courses and are paying for their accommodation to claim this credit – rent a room and digs type arrangements are also recognised tenancies for those students.” – Gerry Scully, Tax Accountant with Irish Tax Rebates.

Mortgage Interest Tax Credit

The Mortgage Interest Tax Credit will be extended due to the increased interest paid on mortgages between 2022-2024.

Claire advises that – “Even with the high interest rates applied to Mortgage holders, there was a low rate of uptake on claiming this credit. We are hoping that more will claim this as the credit can be worth up to €1,250.”

Help-to-Buy Scheme

The Help to Buy Scheme will be extended to 2029.

Gerry advises that: “This is good news for potential first time buyers that this has been extended.”

Inheritance Tax

Capital Acquisitions Tax also know as inheritance tax /gift tax.

• The Group A threshold – Parent to Child has increased to €400,000 .
• The Group B threshold – Grandparents, Siblings, Aunt, Uncle etc. has increased to €40,000 and
• The Group C threshold – all others has increased to €20,000

Gerry advises that: “The increase in the tax free thresholds for CAT are a welcome development and the first increase since 2019. Particularly in Group A, where the CAT threshold has not kept in line with rising house prices.”

Additional budget updates:

• The Employer Small Gift Exemption increased from €1,000 to €1,500, which can be made in 5 payments, up from 2 payments.
• Minimum wage has been increased by €0.80 to €13.50 per hour.
• 2 energy credits worth €125 each will also be deducted from electricity bills later this year.

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