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Understand the Income Tax measures of Budget 2025 at a glance.

Today, the Minister for Finance, Jack Chambers T.D., and the Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe T.D., announced the details Budget 2025.

As anticipated, Budget 2025 introduced several tax measures affecting individuals, families and households.

This article will focus on the tax measure introduced by Budget 2025, specifically under the Income Tax or Personal Tax heading.

Standard rate band increased by €2,000

• The income tax standard rate band has been increased by €2,000 for all earners, resulting in the band for single individuals increasing from €42,000 to €44,000

• The band for Single, Widowed or Surviving civil partners, qualifying for the Single Person Child Carer Credit was raised from €46,000 to €48,000,

• The band for married couples/civil partners with one earner will be increased from €51,000 to €53,000 for the 2025 tax year onwards.

Increase in Tax Credits

• The Personal Tax Credit, Employee Tax Credit and Earned Income Credit will all be increased from €1,875 to €2,000.

• The Home Carer Tax Credit has increased from €1,800 to €1,950.

• The incapacitated child tax credit has been increased by €300 from €3,500 to €3,800.

• The Single Person Child Carer Tax Credit will be increased from €1,750 to €1,900.

• The Blind Tax Credit will be increased from €1,650 to €1,950.

• The Dependant Relative Tax Credit will rise from €245 to €305.

• The Rent Tax Credit has been increased for the tax years 2024 and 2025. It will be €1,000 per year for individuals and €2,000 per annum for a jointly assessed couple (married or civil partners).

• The Sea-going Naval Personnel Tax Credit has been extended for five years to 31^st December 2029.

Other Personal Tax Reliefs

• Mortgage Interest Relief has been extended. There has been no change to the qualifying criteria.  Homeowners must have an outstanding mortgage balance on their principal private residence of between €80,000 and €500,000 as of 31st December 2022. Qualifying homeowners will be eligible for this tax relief in respect of the increased interest paid on their mortgage in 2024 as compared with 2022. Tax Relief is at the standard Income Tax rate of 20%.  The Tax Credit is capped at €1,250 per property.  To claim Mortgage Interest Relief, the taxpayer must file a Tax Return and the taxpayer must be compliant with Local Property Tax (LPT) requirements.

• The Help to Buy Scheme has been extended for a further four years at the current rates until the end of 2029.

• Pre-Letting Expenses Relief. The current tax relief, capped at €10,000 per premises, for certain pre-letting expenditure will be extended for a further three years to 31^st December 2027.  Section 97A TCA ‘97, which deals with rental expenses, provides that certain expenses incurred on a vacant residential property before its first letting following a period of non-occupancy are allowable as a deduction against rental income from that specific premises.

• Various farming related Tax Reliefs have been extended until 31^st December 2027 including (a) Enhanced Stock Relief for Registered Farm Partnerships, (b) Stock Relief for Young Trained Farmers as well as (c) General Stock Relief.

• Budget 2025 introduced a BIK exemption for home car chargers provided by employers. It provides for an exemption from Benefit-in-Kind where it is the employer who incurs the cost of providing a facility for electric charging of vehicles at the home of an employee or director.

• The proposed tapering of Benefit-in-Kind Relief for electric vehicles has been deferred. The universal relief of €10,000 which applied to the Original Market Value of a vehicle in Category A – D is being extended to 31^st December 2025.  The amendment to the lower limit of the highest mileage band has also been extended until 31^st December 2025.   Therefore, the highest mileage band is entered into at 48,001km.

Small benefit exemption

• There will be an increase in the annual limit of the small benefit exemption from €1,000 to €1,500.

• It has also been amended to allow five non-cash benefits, up from two, to be granted by an employer in a single year. The cumulative total of the first five benefits in a calendar year cannot exceed €1,500.

• From 1^st January 2024 an employer is required to return details of all qualifying incentives provided to employees where the small benefit exemption applies.

• This benefit can be given to any employee of the company, including directors and shareholders, providing they are on the payroll.

Universal Social Charge

Various amendments to the USC system were introduced in Budget 2025.

• The 4% rate of USC will be reduced to 3%.

• The 2% USC rate band will increase by €1,622, from €25,760 to €27,382.

From 1^st January 2025, the USC Rates and Bands will be:

• €0 – €12,012 – 0.5%

• €12,013 – €27,382 – 2%

• €27,383 – €70,044 – 3%

• Balance – 8%

Self-employed income over €100,000 will be liable to a 3% surcharge i.e. 11%

PRSI

• All classes of PRSI will increase by 0.1% percentage point from 1^st October 2024.

• From 1^st October 2024 the minimum annual PRSI contribution is €650.

• There will be a further 0.1 percentage point in October 2025. From 1^st October 2025, (i) the employee PRSI rate will increase from 4.1% to 4.2%, (ii) the employer PRSI rate will increase from 11.15% to 11.25% and (iii) the rate will rise from 8.9% to 9% in situations where the weekly income is €496 or less.

• From 1st October 2025, the self employed PRSI rate will increase from 4.1% to 4.2%.

For full information on Budget 2025, please click https://www.gov.ie/en/publication/e8315-budget-2025/

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

As part of Budget 2024, the government signed off on a package of €257 million for the Increased Cost of Business (ICOB).  The main aim of this Grant is to support small and medium sized businesses by contributing towards their rising business related costs including energy, labour, rent, etc.

To Qualify for the ICOB Grant

To qualify for the ICOB grant your business must meet the following conditions:

• It must be a commercially trading business, currently operating directly from a property that is commercially rateable.

• It must have been trading on 1st February 2024 and your intention must be to continue trading for at least three months.

• Your commercial rates bill must be equal to or less than €30,000 for 2023.

• You must submit confirmation of your bank details to the relevant Local Authority.

• The business must be considered rates compliant. This includes businesses with phased payment plans in place.

• It must possess a valid Tax Registration Number.

• It must be tax compliant.

The Grant Amount

The ICOB grant is a once-off payment based on the value of the 2023 commercial rates bill.

The grant is 50% of the commercial rates bill for eligible businesses with a 2023 bill of less than €10,000.

The grant is €5,000 for eligible businesses with a commercial rates bill of between €10,000 and €30,000.

Businesses, however, with a commercial rates bill over €30,000 are not eligible to receive this ICOB Grant.

Please be aware that Public institutions and financial institutions will not be eligible for the grant, except for Credit Unions and specific post office services.

Vacant properties will also not be eligible for the ICOB Grant.

It is important to keep in mind that this ICOB Grant is not a Commercial Rates waiver. Rateable businesses are still required to pay their commercial rates to their local authority.

Today, the Government issued two important updates concerning the Increase in Grant Scheme (ICOB):

• They specifically targeted businesses in the Retail and Hospitality sectors. Businesses operating within these sectors are now eligible for a second grant payment which is equivalent to the initial ICOB Grant amount.

• The closing date for eligibility confirmation which was 1st May 2024 has now been re- opened from 15^th May to 29^th May 2024.

Local Authorities are expected to begin paying out the ICOB Grant to eligible businesses in the coming weeks.

For further information, please follow the links:

https://www.mycoco.ie/icob

https://www.dlrcoco.ie/sites/default/files/2024-03/ICOB%20User%20Guide.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Gift and Inheritance Tax Advice

With effect from today, a new mandatory Capital Acquisitions Tax filing obligation is imposed on the recipients of certain loans from close relatives.

It applies to existing loans as well as new loans made since January 2024, irrespective of whether or not any gift or inheritance tax is due.

Until 31^st December 2023, there was no requirement to file a Capital Acquisitions Tax Return in respect of this type of loan, until 80% of the recipient’s group class threshold had been exceeded.

The aim of this new requirement is to provide the Revenue Commissioners with greater visibility with regard to loans between close relatives in circumstances where the loans are either interest free or are provided for below market interest rates.

The individual is deemed to have received the benefit on 31^st December each year which means the relevant return must be filed on or before 31^st October of the following year.  Therefore, the first mandatory filing date will be 31^st October 2025.

What is a “Close Relative”?

A close relative of a person, includes persons in the CAT Group A or B thresholds, and is defined as follows:

• a parent of the person,

• the spouse/ civil partner of a parent of the person,

• a lineal ancestor of the person,

• a lineal descendant of the person,

• a brother or sister of the person,

• an aunt or uncle of the person, or

• an aunt or uncle of the spouse/ civil partner of a parent of the person.

What about Loans from Private Companies?

There are certain “Look Through” provisions which must be applied to such loans.  In other words, loans made to or by private companies will be “looked through” to determine if the loan is ultimately made by a close relative.  Generally private companies are under the control of five or fewer persons.  The holding of any shares in a private company is sufficient for these provisions to apply, including where the shares in the company are held via a Trust.

If someone receives an interest free loan of say €500k from a close relative’s company, the recipient of the loan would be deemed to take the loan from their close relative. As this exceeds the €335k threshold, this loan would be reportable.

These mandatory tax filing obligations apply in the following situations:

1. Where the loan is from a private company to a person in circumstances where the beneficial owner of the company is a close relative of the borrower.

2. Where the loan is from a person to a private company in circumstances where the beneficial owner of the company and the lender are close relatives.

3. Where the loan is from one private company to another private company in circumstances where the beneficial owners of both companies are close relatives.

What Loans must be Reported?

A mandatory filing obligation arises for the recipient of the loan where:

• there is a loan between close relatives,

• he/she is deemed to have taken an annual gift,

• no interest has been paid on the loan within six months of the end of the calendar year and

• the total balance on the loan and any other such loan exceeds €335,000 on at least one day during the calendar year.

Whether or not a person exceeds the €335,000 threshold would need to be considered in relation to each calendar year.

A loan is deemed to be any loan, advance or form of credit. It need not necessarily be in writing.

All specified loans must be aggregated.  Therefore, if a person has multiple loans from a number of different close relatives, the amount outstanding on each loan, in the relevant period, must be combined to determine if the threshold amount of €335,000 has been exceeded.

The first returns must be submitted by 31^st October 2025 in respect of the calendar year ending 31 December 2024.

What Information must be Reported?

The CAT return must include the following information in relation to reportable loan balances:

1. The name, address and tax reference number of the person who made the loan,

2. The balance outstanding on the loan and

3. All other such information as the Revenue Commissioners may reasonably require.

 For further information, please click: https://www.revenue.ie/en/gains-gifts-and-inheritance/filing-obligations/index.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.