Yesterday’s Budget 2025 announcement made a number of positive changes for Irish residents Personal Finances. In this newsletter, we’ll highlight the most significant measures from Budget 2025 that could affect your income, savings, and long-term financial planning, providing actionable insights to help you stay ahead.
1. Income Tax Changes
Tax Bands: The Standard Rate Cut-Off Point (SRCOP) has been increased by €2000 to €44,000, meaning more of your income will now be taxed at the lower 20% rate, reducing the portion subject to the higher 40% rate. This is a welcome relief for those experiencing “fiscal drag” as wages rise with inflation.
Personal Tax Credits: Key tax credits such as the PAYE Credit and Earned Income Credit have seen modest increases. These changes will result in more take-home pay for employees and self-employed individuals.
What This Means for You:
For middle-income earners, these tax adjustments should lead to noticeable increases in disposable income, helping to offset the effects of inflation.
Review your PAYE or self-employed tax credits to ensure you’re maximizing these benefits.
2. Universal Social Charge (USC) Reforms
There has been good news for lower- and middle-income earners with a slight reduction in USC rates, from 4% down to 3%.
What This Means for You:
If your income falls within the new exemption range, you may now be completely exempt from paying USC, freeing up more of your salary.
Even for those still liable, the lower rates will reduce the impact USC has on your income, improving your cash flow.
3. Housing and Rental Relief
With housing affordability remaining a major challenge, Budget 2025 has introduced a series of measures designed to alleviate pressure on renters and homeowners:
Rent Tax Credit: The government has increased the rent tax credit by €250 to €1000 for an individual or €2000 for a couple, offering additional relief for those renting properties in high-cost areas. This will put more money back into the pockets of renters, especially in urban centres where rental costs remain elevated.
Help for First-Time Buyers: The Help-to-Buy Scheme has been extended to 2029, having been due to end in 2025.
The Mortgage Interest tax relief has been extended. This is for home owners who had an outstanding mortgage balance of between €80,000 and €500,000 on their primary home on 31 December 2022, and paid more interest this year than last year. The relief is 20% of the difference, capped at €1250.
The Mortgage Interest Tax Credit is available on the increased interest you pay on your mortgage in 2024 when compared with the amount you paid in 2022. The tax relief on the increase will be 20%, which is the standard income tax rate, and it will be capped at €1,250.
What This Means for You:
Renters: Ensure you claim your rent tax credit by keeping your rental documentation in order and checking the new eligibility criteria.
First-Time Buyers: If you’re saving for a deposit or looking to buy soon, the extended Help-to-Buy scheme and mortgage interest relief could significantly reduce the upfront costs of purchasing a home.
4. Pension Savings and Tax Relief
The government has increased the Standard Fund Threshold (the lifetime limit on Pension savings) to €2.8m by 2029, moving to €2.2m in 2026 from €2m, making it easier to save for retirement and reflecting inflation increases since the limit was last set in 2012. The auto-enrolment scheme has finally been finalised, to begin in September 2025, meaning every employed person in Ireland earning above €20000 and older than 23, will have a workplace pension.
What This Means for You:
If you’re contributing to a pension, consider increasing your contributions to take full advantage of the tax relief available on higher limits.
For those not yet enrolled in a pension scheme, this is an excellent time to begin. Review your options to ensure you’re maximizing your retirement savings.
5. Childcare and Family Supports
Recognizing the burden of high childcare costs, the government has introduced further subsidies aimed at reducing childcare expenses for working families, with double payments in December. Increased funding for the National Childcare Scheme (NCS) means more families will be eligible for higher subsidies.
Additionally, child benefit payments have been modestly increased, providing more direct financial support to families.
What This Means for You:
Families with young children should review the updated NCS rates and subsidy thresholds to ensure they receive the maximum support available.
The increase in child benefit payments may seem modest, but it could contribute meaningfully to monthly household budgets, especially for families with multiple children.
6. Green Tax Incentives and Sustainable Living
As part of Ireland’s continued commitment to reducing carbon emissions, green tax credits and subsidies have been expanded. Homeowners are now eligible for larger tax credits on energy-efficient home improvements, such as installing solar panels or upgrading insulation. There are also incentives for purchasing electric vehicles (EVs), including enhanced grants and tax reductions.
What This Means for You:
If you’re planning a home renovation, now is an ideal time to explore energy-saving upgrades that qualify for tax credits.
For those considering an electric vehicle, review the available grants and benefits to lower the cost of switching to more sustainable transport.
7. Capital Gains Tax (CGT) and Inheritance Tax (CAT) Updates
No major overhauls were made to Capital Gains Tax (CGT), but the Capital Acquisitions Tax (CAT) thresholds have been increased, particularly for inheritances passed between parents and children, from €335,000 to €400,000. This adjustment will help families transfer wealth more efficiently without incurring high tax liabilities.
What This Means for You:
If you are managing investments or assets, there are still opportunities to minimize your CGT liabilities by taking advantage of allowances.
For families planning to pass down property or assets, the increased CAT thresholds could result in significant tax savings.
Final Thoughts: How to Prepare for 2025
Overall, Budget 2025 has introduced several measures that could positively impact your personal finances—whether through income tax relief, enhanced support for housing, or increased savings for retirement. While these changes are designed to address rising living costs and improve financial stability, it’s important to review your own financial situation to ensure you’re making the most of these new opportunities.
Here’s what you can do next:
Review Your Tax Credits: Ensure you’re claiming all available credits and exemptions to maximize your take-home pay.
Plan for Your Housing Needs: Whether renting or buying, look into the expanded reliefs to see how they can ease housing costs.
Boost Your Pension Contributions: Take advantage of higher tax-free pension limits and begin saving or increase your contributions where possible.
If you have any questions or would like personalized advice on how these changes affect you, please feel free to contact us.