In around seven weeks, the new Minister for Finance Jack Chambers will rise to his feet to deliver Budget 2025 — his first budget, and one which may come just weeks before a general election.
Despite attempts by Ministers over the Dáil’s summer break to temper expectations and keep plans under wraps, the shape of the budget is now emerging. Here is everything we now know about a package that will likely top €10bn.
[Budget 2025: Taxpayers in line for significant income tax and USC cutsOpens in new window]
TAXATION
The upcoming budget will be framed around a tax and spending package of €8.3 billion, which will include additional public spending of €6.9 billion and taxation measures amounting to €1.4 billion. The plan for personal taxation is threefold: increase the level at which the higher rate of tax kicks in, boost income tax credits and introduce further cuts to the Universal Social Charge. In the last budget, the standard rate band — the level at which earners start to pay the higher rate of income tax — went up by €2,000 to €42,000.
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The main tax credits were increased by €100 and the 4.5 per cent rate of USC was reduced to 4 per cent. This time, a similar plan is in the offing: increase the standard rate tax band to €44,000 or more, increase the tax credits, and potentially cut the 4 per cent USC rate to 3.5 per cent. All of these headline measures would cost north of €730m — and this does not include an increase to primary or universal tax credits. All in all, a significant amount of change. It is now almost a certainty, barring any last-minute change of heart, that inheritance tax will be cut. The €335,000 tax-free threshold which applies to children inheriting from parents could rise to €400,000, which would cost €52 million. Then there is the renters’ tax credit. This will be raised from €750 to about €1,000. Ministers are also now considering extending the one-year mortgage interest relief scheme introduced last year which would cost about €125 million, although final decisions have not yet been made.
WELFARE
Minister for Social Protection Heather Humphreys has already said she would like to see welfare increases targeted at those who need them most — pensioners, carers and the disabled. But sources say a general €12 increase in welfare payments is on the table. There will be pressure in the weeks leading up to the budget to increase this to €15 or even €20, but with inflation cooling and the latter increase coming with a €1.5 billion price tag, this may not be a runner.
COST OF LIVING
Last year’s cost-of-living package was worth €2.7 billion — this year’s package looks likely to be smaller in scale. Government sources say, however, that the sweetener in this year’s cost of living package will be the payment dates. Hard-pressed households can expect to see money in their pockets before Christmas, rather than through a series of measures that roll into the spring of 2025. Another round of energy credits is firmly on the table, but not yet agreed. There is a growing consensus, however, around bundling all of the credits together and paying them in one chunk. Whether this is worth €450 or half of this remains to be seen. There will be “a mix” of lump sum payments and a possible double payment of the child benefit. Lump sum payments made in the last budget included a €300 fuel allowance payment, a €400 disability grant and a €400 lump sum Working Family Payment — so expect several of these to return. Ministers are also pushing for another welfare Christmas bonus.
VAT BATTLES
The income tax and USC burden on the Irish household averages out at €19,000 per household, while the combined impact of VAT and excise averages over €15,500 per household. Decisions around VAT do have a significant bearing on people’s pockets. It is now highly likely that the reduced VAT rate on electricity and gas will be extended throughout the winter period. It is an expensive measure but has a big impact on households — saving between €40-€50 on an average annual electricity bill or a bit more for duel fuel users. Separately, the Government last year ended a special 9 per cent VAT rate for hospitality businesses, increasing the tax to 13.5 per cent. All the pointers show there will not be a U-turn on this measure.
CHILDCARE
A further 25 per cent cut in the average cost of childcare is due to kick in next month, and so far, no one in Government appears to be talking about increasing the hourly subsidies or cutting costs further. The focus instead looks to be on core funding, Deis funding and disability funding.
POPULAR AND UNPOPULAR MEASURES
An extension of free schoolbooks to Leaving Cert level students could be on the cards, several sources have confirmed. The 20 per cent cut to the cost of public transport will be extended for another year. A further hike in the price of cigarettes has not been ruled out and a tax on vapes could begin at some stage next year once the technicalities are worked through.
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