Within the next couple of months, Jack Chambers, the recently appointed Minister for Finance, is slated to present Budget 2025. This will be his inaugural budget presentation and it is highly anticipated the unveiling may be just prior to a forthcoming general election.
Despite concerted efforts by Ministers throughout the Dáil’s summer holiday period to moderate prospects and maintain confidentiality about the strategies, the outline of the budget is now surfacing. Details are starting to unfold about an expected package that may well exceed €10bn.
As for taxation, the approaching budget will be outlined on the basis of a financial plan entailing €8.3 billion in terms of tax and expenditure. This includes an enhanced public spending of €6.9 billion as well as taxation strategies totalling €1.4 billion. A three-pronged approach is planned for personal taxation; lifting the threshold for the higher tax rate, augmenting income tax credits, and additional reductions in the Universal Social Charge. In the previous budget, the standard rate band – the earnings limit at which the higher tax rate begins – was raised by €2,000, reaching €42,000.
Main tax credits were promoted an additional €100 and the 4.5 percent rate of USC was shrunk to 4 percent. In the approaching budget, a similar strategy is predicted: taking the standard rate tax band up to €44,000 or even more, enhancing the tax credits and, possibly declining the 4 percent USC rate to 3.5 percent. These major measures will result in an excess of €730m — this does not comprise a leap in primary or universal tax credits. On the whole, a substantial shift is anticipated. There is a high probability, unless there is a sudden rethink at the final hour, that inheritance tax will be lessened. The tax-exempt limit of €335,000 that applies to inheritance between parents and children could jump to €400,000, costing €52 million. The renters’ tax credit is also expected to increase from €750 to roughly €1,000. Ministers are now contemplating the extension of the one-year mortgage interest relief scheme launched last year, carrying a potential cost of about €125 million, although final resolutions have yet to be made.
The welfare aspect of the budget is also due to be focused on and considered in more detail.
Heather Humphreys, the Social Protection Minister, has expressed her desire to target welfare increases towards those who require them the most – namely, the elderly, carers, and the disabled. However, insiders suggest that a universal €12 boost in welfare payments could be forthcoming. In the lead-up period to the budget, there’ll be a push to enhance this to either €15 or possibly €20. Yet, given the easing inflation and the hefty €1.5 billion cost associated with the latter increment, it might be unfeasible.
LIVING EXPENDITURE
The previous year’s living expense scheme was valued at €2.7 billion, but it’s likely that the current year’s scheme will be of a lower magnitude. Despite this, insider sources from the government indicate that this year’s primary enticement in the living cost scheme will be the payment schedule. Financially burdened families can anticipate receiving funds prior to Christmas, as opposed to 2025’s spring via a sequence of measures. While yet to be confirmed, another round of energy credits seems to be in the offing. An emerging consensus is evolving towards consolidating all credits and disbursing them as a singular payment. However, whether this amounts to €450 or half of that value, is yet to be established. This year’s scheme could could involve a combination of lump sum payments and potentially a double child benefit payment. The prior budget included lump sum payments such as a €300 fuel allowance payment, a €400 disability grant and a €400 Working Family Payment lump sum – so one can anticipate several of these to recur. There is also a push from Ministers to secure another Christmas bonus welfare payment.
VAT CONTENTIONS
The financial load of income tax and USC averages to approximately €19,000 per household, whereas the combined strain of VAT and excise averages over €15,500 per household. Therefore, VAT decisions have a profound impact on individual finances. It’s highly probable that the reduced VAT rate applied to electricity and gas will be prolonged throughout the winter season. This measure is cost-intensive, but with significant reprieve for households – saving between €40-€50 on a typical electric bill annually or slightly more for dual fuel users. On another note, the government had previously terminated a special 9% VAT rate for businesses in the hospitality sector, inflating the tax to 13.5%. There doesn’t seem to be any intention to reverse this measure.
CHILDCARE
The average childcare cost is set to experience an additional reduction of 25% in the following month, and seemingly, government representatives haven’t made any comments about raising hourly subsidies or driving down costs further. Instead, the priority seems to be centred on core funding, Deis funding, and funding for disabilities.
MEASURES TAKEN – FAVOURED AND DISFAVOURED
Numerous sources have verified the possibility of extending free schoolbooks to students studying for their A-levels. The reduction in public transport costs, currently at 20%, is slated to continue for another year. A potential rise in the cost of cigarettes hasn’t been discounted, and a proposed tax on e-cigarettes could potentially be initiated next year once the fine details have been addressed.