What Budget 2025 Means for You: A Breakdown For the New Year

As we approach the new year, we have highlighted the crucial changes for contractors and business owners to be aware of in 2025. Key highlights include expanded tax brackets, increased tax credits, and continued support for electric vehicles through the 2024 Benefit-in-Kind (BIK) rules.

Personal Tax Changes

 Social Welfare Changes

• An increase of €12 per week for all social protection payments.
• There will be a double payment for the children’s allowance before Christmas.
• Parents of newborns will receive a one-off “baby boost” payment of €420.
• Recipients of the Working Family Payment will receive a €400 lump sum.
• Funding for the National Childcare Scheme will increase by 44%, expected to lower full-time childcare costs by €1,100.
• Maternity & Paternity Benefit will increase by €15 per week.
• Carers' Benefit has been introduced for the self-employed.

Employment and Business Supports

• The annual limit for the Small Benefit Exemption has increased from €1,000 to €1,500. We expect this could be implemented before the end of the year to apply in 2024.
• The EIIS Scheme has been extended, with the allowable investment limit increased from €500,000 to €1 million for a duration of four years.
• Retirement relief for business transfers exceeding €10 million will now allow for zero Capital Gains Tax (CGT), provided the recipient retains ownership of the business for 12 years.
• The R&D tax credit will see an increase in the first-year threshold from €50,000 to €75,000.

Capital Acquisitions Tax

• The rate remains unchanged at 33%.
• However, each lifetime threshold has increased:
  • Group A threshold increased to €400,000.
  • Group B threshold increased to €40,000.
  • Group C threshold increased to €20,000.

VAT

• The VAT registration thresholds have been raised, with the new limits set at €85,000 for goods and €42,500 for services. These thresholds determine when a business is obliged to register for VAT. VAT in the hospitality sector remains at 13.5%, despite a campaign to have it reduced back to 9%.

Benefit-in-Kind (BIK) for Vehicles

• The €10,000 OMV reduction will be extended for another year, lowering the taxable value of all vehicles by €10,000. Business owners who purchase electric vehicles through their company can benefit from a €35,000 threshold, meaning the first €45,000 will have a Benefit-in-Kind (BIK) rate of 0%. In essence, there will be no changes to the BIK for vehicles.

Education

• Third-level fees (student contribution) have been reduced by €1,000.
• The state fee contribution to postgraduates will increase from €1,000 to €2,000.

Housing

• Mortgage interest relief, introduced in 2024, has been extended for another year.
• The Rent Tax Credit will increase to €1,000 for both 2024 and 2025.
• Stamp Duty will increase to 6% for properties valued over €1.5 million. This is a third rate and only applies to the amount that exceeds the threshold.
• The Help to Buy Scheme is extended until the end of 2029.
• Stamp Duty will increase from 10% to 15% for vulture funds purchasing multiple blocks of housing.

Other Key Changes

 Conclusion

The Budget 2025 has brought several welcome changes for contractors and business owners, from tax reliefs and social welfare enhancements to specific supports for business growth. As always, it’s essential to stay informed on the latest updates to ensure that you can plan effectively for the year ahead. If you have any questions on how these changes may affect you, feel free to reach out to Icon Accounting for advice and support.

Stay tuned for more insights and updates on how these changes will shape the landscape for contractors in 2025!