Key Tax Changes in Ireland for 2025: What Businesses & Individuals Need to Know
Staying on top of tax changes is crucial for both businesses and individuals. Budget 2025 introduced a number of updates that affect income tax, credits, VAT, corporate rules, and more. In this post we’ll break down the major changes and suggest actions you should consider.
1. Income Tax & Credits — More Relief for Individuals
Increase in the standard rate cut-off
From 1 January 2025, the threshold for the standard (lower) rate of income tax rises from €42,000 to €44,000 for single individuals (with proportional increases for married couples).
Higher tax credits
Many of the main tax credits have been increased:
Personal, Employee and Earned Income Credits: + €125, bringing them to €2,000 each
Home Carer Tax Credit: + €150 to €1,950
Single Person Child Carer Credit: + €150 to €1,900
Incapacitated Child Credit: + €300 to €3,800
Dependent Relative Credit: + €60 to €305
Blind Person's Credit: + €300 to €1,950
These increases help reduce the tax burden on many taxpayers, especially those with caring responsibilities or dependants.
Universal Social Charge (USC) changes
The 4% USC rate is reduced to 3% from 1 January 2025.
The entry point for that 3% band is increased (by €1,622) so more income is taxed at lower USC rates.
These adjustments aim to ease pressure on middle and lower earners.
Rent Tax Credit
The Rent Tax Credit will increase to €1,000 for individual renters (or €2,000 for jointly assessed taxpayers) for 2025.
2. Business & Corporate Tax Changes
VAT thresholds & rates
The VAT registration thresholds are increased in 2025:
• For goods, from €80,000 to €85,000
• For services, from €40,000 to €42,500A reduced 9% VAT rate on heat pump installations is introduced, effective 1 January 2025, to encourage energy-efficient upgrades.
The temporary reduced VAT on electricity and gas is extended until 30 April 2025.
These changes help smaller businesses by delaying VAT registration thresholds and encouraging green investments.
Corporate & business tax reliefs
A participation exemption for foreign‐source dividends will be introduced from 1 January 2025 for companies receiving dividends from EU/EEA or treaty jurisdictions.
The Research & Development (R&D) tax credit is enhanced in 2025 — the first-year payment threshold is increased by 50% to €75,000.
Increased relief for listing expenses: companies can deduct up to €1 million in costs associated with an initial stock exchange listing.
The Small Benefit Exemption for employees is increased: non-cash benefits up to €1,500 per year are now exempt (up from €1,000), and employers may grant up to 5 non-cash benefits rather than 2, subject to cumulative limit.
Interest deductibility / financing rules under review
The Department of Finance has launched a consultation (ending January 2025) on rules for interest deductibility, the treatment of interest, and related anti-avoidance rules (e.g. under the EU Anti-Tax Avoidance Directive).
These areas may see further changes in coming years, so businesses with debt or financing structures should keep an eye on developments.
Global minimum tax / OECD Pillar Two
Large multinationals will need to comply with the global minimum tax (Pillar Two) rules. While Ireland’s headline corporate tax rate remains 12.5% for trading income, the new rules mean that for entities with global revenue over €750 million, there may be additional top-up taxes.
3. Capital Acquisitions, Capital Gains & Other Taxes
Capital Acquisitions Tax (CAT / Inheritance / Gift Taxes)
The Group A threshold (for children inheriting from parents) increases from €335,000 to €400,000.
Group B and C thresholds are also increased:
• Group B (e.g. siblings, nieces/nephews) to €40,000 (was €32,500)
• Group C (more distant relatives) to €20,000 (was €16,250)
These changes apply to gifts and inheritances received on or after 2 October 2024.
Capital Gains Tax (CGT)
While no sweeping change to the CGT rate was announced in Budget 2025, reliefs and thresholds may be impacted by policy adjustments or future budgets.
Stamp Duty & Property / Vacant Homes
The Vacant Homes Tax rate is increased from 5× the basic Local Property Tax (LPT) to 7× LPT.
Other property and stamp duty rules remain but should be watched for further tweaks in future budgets.
4. What It Means — Risks & Opportunities
Tax reliefs to claim: Individuals should check that they're claiming increased credits (e.g. rent, home carer).
Cash flow planning: Businesses anticipating investments in green tech (e.g. heat pumps) may benefit from the reduced VAT.
Compliance vigilance: Companies with significant debt or foreign operations should monitor proposed interest deductibility changes and Pillar Two compliance.
Thresholds shifting: Businesses close to VAT registration thresholds may gain breathing room.
Estate and gifting planning: The higher CAT thresholds may open opportunities for earlier intergenerational transfers.
5. Action Checklist for 2025
Personal Tax / Credits – Review whether you now qualify for increased tax credits or if you fall into a lower USC rate.
Business VAT – Check if your turnover remains below the new threshold and plan for potential savings on energy-efficient investments (like heat pumps).
Payroll & Benefits – Update your employee benefit schemes to take advantage of the increased Small Benefit Exemption and allowance for more non-cash benefits.
Financing & Debt – Keep an eye on the consultation around interest deductibility rules and consider how future changes could impact your business financing costs.
Multinational / Large Firms – Ensure you are prepared for compliance with Pillar Two / OECD global minimum tax rules.
Estate Planning – Reassess your gifting and inheritance strategies in light of the higher Capital Acquisitions Tax thresholds.