Ireland’s Department of Finance published the Budget 2025 on yesterday, 1 October 2024.

The Irish government’s latest budget mentions EUR 10.5 billion in tax cuts and spending increases. Additionally, the budget outlines how the government plans to utilise the EUR 14 billion Apple tax windfall to enhance the state’s ageing infrastructure.

“Today’s budget is unique in the opportunity it presents to plan, transform and deliver for the future,” Finance Minister Jack Chambers told parliament. “It is clear that supply is the main constraint on growth at present. We are investing at scale to address these bottlenecks and put in place long-term solutions.”

The 2025 budget includes various tax measures outlined in the Budget 2025 Tax Policy Changes document.

Angel investor capital gains tax relief

The Angel Investor Capital Gains Tax Relief targets encouraging business angel investment in innovative start-ups.  It is proposed to increase the lifetime limit on gains, on which the reduced rate of Capital GainsTax applies, from EUR 3 million to EUR 10 million.

Capital gain tax retirement relief

  • The Finance Act 2023 increased the age parameters and introduced a cap on Retirement Relief of EUR 10 million.
  • The Finance Act 2024 will retain the increased upper age limit and introduce a clawback period of 12 years for relief available for disposals over EUR 10 million, after which the CGT will be abated.

Relief for investment in corporate trades

  • It is proposed to extend the Relief for Investment in Corporate Trades, which comprises the Employment Investment Incentive (EII), Start-Up Relief for Entrepreneurs (SURE), and the Start-Up Capital Incentive (SCI), for a further two years to 31 December 2025.
  • The limit on the amount an investor can claim relief on for EII investments will be increased from EUR 500,000 to EUR 1,000,000. For SURE investments, the relief available is proposed to be increased to a maximum of EUR 140,000 per year (EUR 980,000 over 7 years).

Research and development tax credit

The R&D tax credit is a key part of Ireland’s corporate tax strategy to attract foreign direct investment (FDI) and foster an innovation-driven domestic business sector. The Research and Development (R&D) Tax Credit provides a 30% tax credit for all qualifying R&D expenditures.

Participation exemption for foreign dividends

The 2025 budget proposes introducing a new Participation Exemption for Foreign Dividends to simplify existing double taxation relief provisions. It provides an alternative method of double tax relief for dividends received from subsidiaries in EU/EEA and double tax treaty partner jurisdictions, with a significantly lower administrative burden than the existing ‘tax and credit’ method of relief.

Carbon tax

The rate per tonne of carbon dioxide emitted for petrol and diesel will increase from EUR 56.00 to EUR 63.50 from 9 October as per the trajectory set out in the Finance Act 2020. This increase will be applied to all other fuels from 1 May 2025.

Bank levy

A revised bank levy was introduced for 2024, which is now being extended for another year to apply in 2025. It is applied to those banks that received financial assistance from the State during the banking crisis (AIB, EBS, Bank of Ireland, and PTSB). It will have a revenue target of EUR 200 million for 2025.

Stamp duty on residential property

  • A third rate of Stamp Duty on residential properties to apply where the value/acquisition price exceeds EUR 1.5 million is now being introduced. It will apply at a rate of 6% to that element of the value above EUR 1.5 million.
  • The existing 1% Stamp Duty rate on residential property value up to and including EUR 1 million and 2% on any value above EUR 1 million and at or below EUR 1.5 million will continue to apply.

Accelerated capital allowances – gas & hydrogen vehicles

The Accelerated Capital Allowances scheme for gas and hydrogen-powered vehicles and refuelling equipment provides a tax incentive for companies and unincorporated businesses who invest in such vehicles and equipment for the purposes of their trade.  Extending the relief for a further year is proposed to 31 December 2025.

Capital acquisition tax threshold

The standard rate of CAT is 33% in respect of gifts and inheritances taken on or after 6 December 2012. Currently, there are three tax-free thresholds depending on the relationship between the disponer and the beneficiary, with CAT applying on the amount over the thresholds.

An increase to the thresholds for gifts or inheritances will apply as follows:

  • CAT A Threshold to EUR 400,000;
  • CAT B Threshold to EUR 40,000 and;
  • CAT C Threshold to EUR 20,000.

Mortgage interest tax relief

  • Mortgage interest tax relief extension: This has been extended for one year to cover the increased interest paid in 2024 compared to 2022.
  • Relief calculation: Eligible homeowners receive relief at the standard income tax rate (20%) regarding the increased interest paid on their mortgage, capped at EUR 1,250 per property.
  • Qualifying criteria: Outstanding mortgage balance on the principal private residence must be between EUR 80,000 and EUR 500,000 as of 31 December 2022.

VAT extension of 9% for gas and electricity

It is proposed to extend the 9% VAT rate from 1 November 2024 to 30 April 2025 to address cost of living pressures associated with the price of gas and electricity.

Rent tax credit

To assist renters with the cost of living, the rent tax credit is being increased by EUR 250 for single persons (and EUR 500 in the case of jointly assessed taxpayers) for the 2024 assessment year.

Personal income tax

  • An increase of EUR 2,000 in the income tax standard rate band cut-off point for all earners;
  • Single, widowed, or surviving civil partner from EUR 42,000 to EUR 44,000;
  • Single, widowed, or surviving civil partners qualifying for the Single Person Child Carer Credit from EUR 46,000 to EUR 48,000;
  • Married couples or civil partners (one income) from EUR 51,000 to EUR 53,000;
  • Married couples or civil partners (two incomes) from EUR 51,000 to EUR 53,000 (with an increase of a maximum of EUR 35,000).

The government is also adjusting the income tax credits, with Budget 2025 providing for the following changes:

  • An increase of EUR 125 in the Personal Tax Credit from EUR 1,875 to EUR 2,000;
  • An increase of EUR 125 in the Employee Tax Credit from EUR 1,875 to EUR 2,000;
  • An increase of EUR 125 in the Earned Income Tax Credit from EUR 1,875 to EUR 2,000;
  •  An increase of EUR 150 in the Home Carer Tax Credit from EUR 1,800 to EUR 1,950;
  •  An increase of EUR 150 in the Single Person Child Carer Tax Credit from EUR 1,750 to EUR 1,900;
  •  An increase of EUR 300 in the Incapacitated Child Tax Credit from EUR 3,500 to EUR 3,800;
  •  An increase of EUR 300 in the Blind Person’s Tax Credit from EUR 1,650 to EUR 1,950;
  •  An increase of EUR 60 in the Dependent Relative Tax Credit from EUR 245 to EUR 305.