The 2025 Budget, although presented as a pre-election gift, might leave many households across the nation baffled next January when they assess – or battle to discern – the impact of these changes on their salaries. While those who have children or depend on weekly stipends, such as the state pension, will be advantaged, the government has managed to limit its future spending by choosing one-off strategies. Take the child benefit, for instance, which has not genuinely risen but will be disbursed as a bonus this year, or the slight increase in the minor benefit allowance (to €1,500) that will only be beneficial to those earning a bonus from their employer.
When considered from an income tax standpoint, the modifications appear less consequential. According to Katie O’Neill, a PwC director, these changes mean individuals and income earners will have slightly more in hand, but the income tax load hasn’t undergone a substantial shift.
Budget 2025 highlights are double child benefit payment, personal tax reductions, petrol and diesel price rises, and determinations on how it will impacts individuals’ finances and housing delivery efforts.
However, the escalating cost of living will likely diminish much of the increase in net salary. As asserted by O’Neill, even though inflation has slowed, the living cost remains higher than before.
Essentially, once we eliminate one-off, voter-pleasing interventions such as child allowance bonuses, energy subsidies and the extension of mortgage interest relief, it doesn’t seem that families will suddenly be able to splurge on a Caribbean cruise or even afford an additional monthly takeaway.
Also, consider Rebecca, an employee earning €22,000 per annum. Due to recent augmentations in PRSI (which rose from 4 percent to 4.1 percent starting October 1st), she will take home less of her income next year compared to this year, falling short by roughly €17 annually, as displayed in our table below.
O’Neill points out that the alteration in the standard rate doesn’t impact her owing to her income falling below this threshold (which was raised to €44,000 for an individual). Furthermore, she does not profit from modifications to the tax credit (which saw an escalation of €125 in personal/employee/earned income tax credit) since her income tax is lower and already offset by credits. Despite Finance Minister Jack Chambers’ insistence that the objective of the budget is to provide assistance to low and middle-income earners, O’Neill finds it surprising. However, those with earnings in the mid-€40,000s, such as Jian and Sean whose income is €47,500, will gain considerably from the heightened standard rate band. They’ll retain an extra €735 of their earnings this year, equating to a monthly increase of roughly €61.
Pensioners are poised to do even better, thanks to a €12 rise in their weekly state pension which totals to an annual gain of €624 or €1,248 for a couple. Combined with tax adjustments, this means that pensioner couples benefit most this year.
Notably, Budget 2025 triggers the question, what does it mean for you? It may also be beneficial – particularly for their heirs, usually their offspring, courtesy of the increase in the tax-free threshold to €400,000. Considering that this is the first significant increase since 2011, even though it’s the first increase since 2019, O’Neill views this as a positive change. With property prices on the rise, this step will likely be welcomed by many, ensuring that the family estate remains out of the inheritance tax ambit, she suggests.
On the housing sector side, potential home buyers may appreciate the rise in the rent credit, aiding them to save more for property purchase. It’s risen by €250 per annum, with the change taking effect immediately. Hence, those qualifying will experience the hike this year and the next. Furthermore, the news that Help to Buy has been prolonged until the close of 2029 might be received favorably, though some may express disappointment that the cap of €500,000 wasn’t lifted.
Mark and Linda, a wealthy couple, may reconsider their decision to shift homes following the decision to raise the stamp duty to 6% on properties worth over €1.5 million. These high-value property purchases are typically endorsed, as they maintain movement in the property market. Being landlords, they might have anticipated more than the extension of the relief for pre-leasing expenses, capped at €10,000. This tax relief will remain in place until 2027 concludes.
Regarding other budget families, Tom, a single parent and public sector employee based in northern Co Dublin, makes an annual net gain of €742. He reaps an annual income of €36,000 as a nurse. Despite his €1,000 monthly expenditure on a two-bedroom apartment, he aims to buy a property soon, banking on the Help to Buy scheme for his deposit.
Jian and Sean, a single-income household with two kids, aged 13 and seven, residing in Kilkenny, see a net annual gain of €735. Jian, who abandoned his job as a pilot a decade ago after their son’s birth and recently resumed working again, makes an annual income of €47,500. Sean, formerly a full-time tech employee, now stays at home with their offspring. Additionally, they make an extra €10,000 annually by offering a room for rent in their house, thanks to the rent-a-room scheme. They receive this sum tax-free, added to Jian’s wages, as it falls under the tax-exemption limit of €14,000.
Leslie and Kitty, a pensioner couple based in Cork, enjoy a net annual gain of €1,499. Homeowners in their late 70s, they enjoy an income of €52,087, bolstered by the budget-day increment of their pension by €12 per week. Leslie draws an occupational pension of €22,000 in addition to the State contributory pension and deposit interest. Kitty also benefits from the State contributory pension.
Rebecca, a low-income earner, however, suffers net annual loss of €17.
At the age of 33, Rebecca chose to live independently, parting from her family house in 2019. She found a single-bedroom flat to let where she now resides. Initially serving as a full-time waitress, she switched careers and is presently employed from home as a support representative for a web-based shop, earning an annual remuneration of €22,000.
Alison and Ekene, a couple with two-fold income, make a collective annual profit of €1,227. Being in his mid-fifties, Ekene dwells in Louth, living alongside his wife, Alison. As a hotel owner, he runs his own business, while Alison supplements their income by working as a beautician part-time, making €23,000 per year. They have a family of four, with two of their kids still residing with them. Over the past few years, Ekene has been able to maintain a consistent yearly income of €152,000.
Mark and Linda, a wealthier couple in their early forties, enjoy annual earnings amounting to €1,774. Parents to two children, they chose to settle in a four-bedroom luxury home in Dún Laoghaire, with the property’s current value being €1.5 million. Both serving as accountants, their collective yearly remuneration equals €300,000. They enjoy the flexibility of working from home on several days each week. Additionally, they also benefit from a secondary source of income – a rented property which yields €25,000 each year.