In the upcoming 2025 Budget, taxpayers are set to benefit from considerable reductions in income tax and Universal Social Charge (USC). Moreover, it’s expected that there’ll be increases to social welfare by at least €12 per week.
As we approach the October 1st budget announcement, it’s becoming clearer that a continued decrease in energy VAT is probable. Furthermore, government officials are contemplating the prolongation of a novel mortgage interest relief scheme. The possibility of providing free schoolbooks for students up to Leaving Cert level is being explored, while it’s virtually confirmed that public transport fares will see a continued 20 per cent reduction.
However, the prospects of further decreases in childcare expenses are diminishing. It’s currently speculated that a successive 25 per cent reduction in average childcare costs will come into effect from September.
The government is progressively formulating a new cost-of-living package that won’t reach the €2.7 billion total from the previous year. Yet, indications suggest that households can anticipate a “significant boost” through a combination of lump sum payments set to be distributed before Christmas. As part of this, the authorities may consider another round of electricity credits, issued in one batch and applied collectively to consumer accounts by year’s end.
The temporary reduction in VAT for electricity and gas is predicted to be extended to cover the winter season. Nevertheless, there’s seemingly no chance of the special 9% VAT rate for hospitality businesses being reinstated.
The overall shape of Budget 2025 revolves around an €8.3 billion package comprising tax measures and spending, with an additional €6.9 billion in public expenditure and taxation initiatives reaching €1.4 billion. The precise scale of the supplementary cost-of-living package is still under discussion by party leaders and will be finalised nearer to the budget release date.
In terms of individual taxation, the strategy is divided into three areas: elevating the threshold for the higher tax rate, enhancing income tax credits, and implementing further reductions to the Universal Social Charge.
Potential modifications to the standard tax rate are being contemplated, which could result in a rise to over €44,000, together with a proposed reduction of the 4% USC rate to 3.5%.
It’s widely anticipated that there will be a reduction in inheritance tax, with the existing exemption limit of €335,000, for a child inheriting from their parents, seeing a possible increase to €400,000. Concurrently, there is strong likelihood of increasing tax credit for renters from €750 to approximately €1,000.
Insider sources have confirmed discussions about the continuation of the one-year mortgage interest relief scheme, introduced last year. Weekly welfare payments could potentially see a boost by €12, as proposed by certain government officials.
In terms of living expenses, insiders hint at a mix of lump sum payments and possibly double child benefit payments. Last year’s budget saw the inclusion of a €300 fuel allowance, a €400 disability grant and a €400 lump sum payment for working families. Ministers are also advocating for an additional Christmas bonus under the welfare scheme.
The Taoiseach has hinted that a reduction in average child care costs, by 25%, is expected to roll out next month. However, little hope exists for a further adjustment in hourly subsidies. Instead, the focus will be directed to core funding, Deis funding, and disability funding.
There’s a lack of definitive decision about increasing the price of cigarettes, and the introduction of a vaping tax might be a possibility in the upcoming year.