Subscriber OnlyBudget 2025

Budget 2025: What we know so far – from tax cuts to pension increases and free schoolbooks

This year’s measures will be framed around tax and spending package of €8.3bn, with cost-of-living bundle worth roughly €1.5bn

Illustration: Paul Scott
Budget 2025: taxation measures have been flagged amounting to €1.4bn. Illustration: Paul Scott
Jack Horgan-Jones
Jennifer Bray
Cormac McQuinn
Sarah Burns
Tue Oct 01 2024 - 06:45

Minister for Finance Jack Chambers will deliver his first budget on Tuesday but already we know the shape of it.

There is about €1.8 billion for brand new spending, €1.4 billion for tax cuts and up to €2 billion for once-off measures – plus €3 billion for infrastructure spending from AIB proceeds. Here are the main features:

Taxation

Budget tax measures amounting to €1.4 billion were flagged by the Government in the summer economic statement earlier this year. In Budget 2025, we are expecting:

  • A 1 per cent reduction on the USC levied on income from €25,760 to €70,044, bringing that rate down to 3 per cent. This will be a costly intervention, but it is double last year’s reduction with an election beckoning.
  • The ceiling for the 2 per cent band of USC is also expected to rise by €1,622 to €27,382.
  • The entry point for the higher rate of income tax is expected to go up by another €2,000 from €42,000 to €44,0000.
  • Inheritance tax thresholds are expected to increase across the board. The group A category for tax-free sums inherited by children from their parents will go up from €335,000 to €400,000; group B, covering grandchildren, siblings, nieces and nephews will go up from €32,500 to €40,000; group C covering other relationships will rise from €16,250 to €20,000. The total cost of this will be in the region of €88 million.
  • Tenants will get an extra €250 in the renter’s tax credit to cover both 2024 and 2025. It would mean they could claim up to €1,000 for both years.
  • The one-year mortgage interest relief scheme introduced last year is set to be extended for another year, which would cost about €125 million.
  • Meanwhile, as The Irish Times reported last week, Government is expected to scrap plans to impose a capital-gains tax (CGT) liability on the transfer of family businesses worth more than €10 million.
  • Separately, employers are set to benefit from a change in the entry point for the higher rate of employer PRSI to soften the blow of expected minimum wage hikes coming on budget day.
  • Keep an eye on the bank levy, which looks likely to be extended – but will it be increased?

[ Budget 2025: Do you have a budget question you’d like answered? Ask it here. ]

[ Budget 2025: Taxpayers in line for significant income tax and USC cuts ]

Welfare

Budget 2025: Minister for Social Protection Heather Humphreys has argued for targeted increases in welfare supports. Photograph: Dara Mac Dónaill
Budget 2025: Minister for Social Protection Heather Humphreys has argued for targeted increases in welfare supports. Photograph: Dara Mac Dónaill

The social welfare budget always goes down to the wire, and this year looks to be no different.

READ MORE
  • A major issue that had to be resolved in the run-up to budget day was the level of welfare increases. The State pension is set to increase by about €12 a week, with proposals on the table for such a hike across the board.
  • There will be a €15 per week increase in maternity and paternity benefit.
  • The Green Party wanted a special once-off child benefit payment worth €560 which would be paid out the first month of a child’s birth. Parents of newborn babies are expected to receive a triple child benefit payment upon the birth of their child from January 1st next year. The proposed “baby boost” payment will mean a special one-off payment of €420 paid out following the birth of a newborn.
  • There will be a €12 increase to weekly welfare payments, and a €20 increase in the Domiciliary Care Allowance. The Government is also expected to announce two double welfare payments in October and at Christmas; and two double payments of child benefit.
  • In terms of the fuel allowance, Humphreys has suggested she wants to extend its availability to those over 66. At present, it is available to those over 70. Meanwhile, carers are due to be eligible for fuel allowance as well.
  • A package for carers is due to include an increase in the Carer’s Allowance means test limits to €625 per week for a single person and €1,250 per week for a couple; an increase in the Carer’s Support Grant to €2,000 from €1,850; and the Carer’s Benefit will be extended to self-employed workers.
  • A new universal companion pass for people aged over 70 will be introduced, where all pensioners over the age of 70 will be able to bring a loved one or friend on public transport free of charge.
  • The start dates for two significant social welfare reforms will also be announced as part of Budget 2025. Pay Related Benefit, which ensures those with stronger working histories receive higher welfare payments if they lose their jobs, will start on March 31st, 2025. The long-promised pension enrolment scheme will start on 30th September 2025.

Cost of living

  • Last year, there were three energy credits worth €150 each but Budget 2025 looks set to include two credits to the value of €250.
  • Among various anticipated one-off payments are: a €500 disability support grant; a €400 carer’s support grant; a €300 fuel allowance payment; a €200 living alone allowance; a €400 working family payment; and a €100 child support grant (formerly qualified child payment).
  • The Qualified Child Payment will be renamed as the Child Support Payment – and weekly payments for under 12s will be increased by €4 to €50 and for over 12s increased by €8 to €62.
  • The other universal payment will be the double child benefit paid out before Christmas.
  • The Green Party has proposed extending free public transport to children under nine (currently it only covers the under-fives) both to save families’ money and reduce emissions by encouraging the use of public transport. Again, at a cost of €8 million it is not massive money should the proposal end up in the budget.
  • Keep an eye out for the minimum wage – the expectation is that an increase will be announced, most likely by 80 cent.

VAT battles

  • The reduced VAT rate on electricity and gas will be extended throughout the winter period until April. 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 dual fuel users.
  • Last week, Minister for Enterprise Peter Burke said he would not rule out a return to the reduced rate of 9 per cent of VAT for a certain section of hospitality but that was a collective decision for Government. If nothing comes of this, business will expect something to make up for it, but things have been suspiciously quiet.
  • In terms of business, there are proposals on the table to cut red tape by reducing Revenue Commissioner’s reporting requirements, while changes to CGT relief for entrepreneurs and the R & D tax credit are being sought. However, a Fine Gael source said a rates rebate for small firms floated by the Greens was “never on the table”, and a €750 tax credit for young people and a VAT cut on broadband bills don’t look to be happening.

Childcare and disability

A further 25 per cent cut in the average cost of childcare has kicked in and there appears to be no talk of increasing the hourly subsidies or cutting costs further. The focus instead looks to be on core funding, Deis funding and disability funding.

There will be a 24 per cent increase in funding for childcare, with €1.34 billion agreed given to account for the growing number of children in the system and to provide more income for creches that have been subject to a fee freeze.

Popular and unpopular measures

  • Free schoolbooks to Leaving Cert-level students will be extended.
  • There will be funding for schools to buy electronic pouches for smartphones to be used during school hours to enforce bans on device usage, according to Minister for Education Norma Foley. She also wants increased allocations for 1,500 new special needs assistants, school transport and 350 new special classes.
  • Minister for Higher Education Patrick O’Donovan has been pushing for a further cut in third-level fees, perhaps in the order of €500. He looks to have secured a 15 per cent increase in the income bands for Susi student support grants, meaning higher-earning households will become eligible.
  • A 15 per cent across-the-board increase on student grants is also expected, while the Government is expected to up the special rate of maintenance threshold from €26,200 to €27,400 in line with social welfare increases. Changes to student grants will likely take effect from September 2025.
  • There will be significant allocations for the third-level sector, at least €150 million in new spending for the Funding our Future strategy, spread over five years. There will be €1.5 billion in spending outlined for surpluses from the National Training Fund.
  • The 20 per cent cut to the cost of public transport will be extended for another year. Funding for at least 1,500 special needs assistants being sought by Foley could ease pressure on the special education system.
  • A further hike in the price of cigarettes has not been ruled out and a tax on vapes is likely to begin at some stage next year once the technicalities are worked through, with indications it will be levied on nicotine content rather than across the board.
  • There was a Government spat around delaying the planned introduction of the residential zoned land tax but it was resolved last week with carve-outs for active farmland.
  • There will be changes to the tax on so-called “vulture fund” bulk purchases. Proposals include reducing the number of homes that can be purchased before a higher level of stamp duty kicks in, hiking the 10 per cent stamp duty on purchases of 10 homes or more in a year that is currently in place, or increasing the relevant period to 18 months. A higher rate is seen as most likely, potentially rising an extra 5 per cent to 15 per cent.
  • James Lawless, the Fianna Fáil Minister of State at the Department of Transport, has been pushing for a funding shortfall of some €40 million for road improvements to be addressed as part of budget talks.

Infrastructure, Apple and AIB billions

A total of €17 billion between Apple and AIB share proceeds needs to be spent – but we won’t get firm indications on what, beyond a certain level.

One thing that is over the line is another €1.25 billion for the Land Development Agency to increase its homebuilding targets by 4,000.

Expect high-level indications of where this money is going to end up – water and electricity are big sticking points, so Irish Water and EirGrid will likely be beneficiaries.

Housing

The big question is how much will be allocated to Minister for Housing Darragh O’Brien’s various schemes, which is likely to be a function of funding levels given to other departments.

In terms of new measures, one source said last week housing will be more like a “few sprinkles on top, rather than a whole new knickerbocker glory”. In that space, we have the rent tax credit mentioned above, and the Help to Buy scheme will be extended until 2029 – however, moves to expand it for renters have not been approved, with higher grants for dereliction works still on the table.

Health

Funding to maintain existing levels of service in the health service for 2025 has been agreed as far back as the summer economic statement in July with funding of almost €1.2 billion being earmarked.

The budget will also include free hormone replace therapy (HRT) for women going through menopause, saving them €360-€840 a year. The largest ever health budget will also include an additional €30 million funding for new medicines next year.

Also high on the list of asks from Fianna Fáil Minister for Health Stephen Donnelly is funding to staff extra beds in the system. Some 300 hospital beds alone could open next year, provided the funding is there to staff them. Expansion of State-funded assisted human reproduction has been floated, though it is uncertain if this will be included. Free prescription contraception to women over the age of 35 has also been under consideration. Extending the scheme to 16-year-olds – which is said to be “legally complex” – is not expected to happen in Tuesday’s budget.

Farming

Fianna Fáil Minister for Agriculture Charlie McConalogue is understood to be pushing for improved schemes to support a wide variety of farmers including those with sheep, beef and dairy/beef farms.

He wants to see supports for sheep farmers increase by €5 to €25 per ewe and funding is also set to be secured for the €100-per-hectare support for tillage farmers who planted in 2024. Talks also focused on ensuring funding for existing agriculture schemes such as the Acres payment to support environmentally friendly farm practices, which saw 55,000 farmers sign up – 10 per cent more than originally envisaged.

Policing, Justice and Defence

There will be new investment for tackling domestic, sexual and gender-based violence, expanding prison capacity and speeding up the processing of international protection cases through the funding of around 400 new staff for the International Protection Office.

  • In a major policy play, Minister for Justice Helen McEntee has secured funding for 1,100 additional prison spaces over the next five years in existing prisons. She is also preparing the Curragh as a new prison, with Thornton Hall being reviewed as a possible further prison location. The capital budget for the Irish Prison Service will rise by over 70 per cent next year to deliver the expansion plan.
  • Hundreds of additional staff are to be recruited in prisons, including new prison officers. Some 200 additional staff are being hired for the remainder of this year, with 150 being hired next year.
  • Ms McEntee is also seeking money for Garda recruitment, with funding for 800-1000 extra gardaí and raising the Garda training allowance to €354.
  • For the Defence Forces, a lot of investment has already been allocated under the approved modernisation plan, and there will be an extension of the seagoing Naval personnel tax credit for another five years in the budget. There will be funding for hundreds more personnel, cash for external expertise, and capital funding for new radar and subsea capabilities, with a “record allocation” promised overseas development in the Department of Foreign Affairs.

Media and the Arts

It is known that the budget will include €42 million in exchequer funding for cash-strapped and controversy-hit broadcaster RTÉ along with an expected €78 million worth of free TV licences to groups such as pensioners. Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media Catherine Martin confirmed on Wednesday she is not seeking any additional money for RTÉ.

The Irish Times understands the Arts Council is to be allocated some €140 million in funding as part of Tuesday’s budget. The funding will be aimed at additional support for artists, venues and production companies and will also be invested in young people and children.

Ms Martin (Greens) has secured an extension of the basic income for artists scheme to the end of 2025.

The pilot scheme covering some 2,000 artists, who are paid €325 per week, was due to end in August next year.

While it will be a matter for the next government to decide if it will be continued beyond the three-year pilot, some €35 million has been earmarked to cover the full year in 2025.

Culture Ireland is to receive €8 million next year in part to enhance the promotion of Irish creatives overseas.

Tourism supports are to be provided for initiatives to attract more visitors to regions facing challenges and into the country during offpeak seasons.

There will be funding to draw new tourism business events to Ireland and there is to be a new initiative to boost inward tourism numbers at Halloween towards Cork, Galway, Waterford and Killarney.

A tourism marketing funding of €61 million is set to be provided in 2025 and Fáilte Ireland is to receive €36 million to allow the agency to continue and expand product development.

The overall allocation for sport is expected to be more than €230 million, a 10 per cent increase on this year.

Additional funding will go towards Sport Ireland to build on the success of this year’s Olympics and Paralympics as well as funding for the Football Association of Ireland to support inclusion initiatives.