The 2025 budget has introduced several key changes in personal income tax, minimum wage, and various benefit exemptions, reflecting a well-rounded approach to economic adjustments for the coming year. Here’s a breakdown of the most important updates from a payroll perspective.
Tax Rates
The government has announced a personal income tax package worth €1.6 billion. A significant highlight is the reduction of the Universal Social Charge (USC) from 4% to 3%, which will offer considerable relief to many taxpayers. Additionally, the standard rate income tax cut-off point has increased from €42,000 to €44,000, allowing more earnings before facing higher tax rates. There are also increases in the Personal, Employee, and Earned Income Credits, each rising by €125.
National Minimum Wage (NMW)
Effective 1 January 2025, the national minimum wage will increase by 80 cents, setting the new rate at €13.50 per hour. This change aligns with efforts to ensure fair wages amid rising living expenses.
Small Benefit Exemption
Employers can now reward staff with non-cash bonuses valued up to €1,500—up from the previous limit of €1,000. Moreover, employees can now receive up to five non-cash benefits annually, instead of the previous two, under this exemption scheme.
Transport
For those with company cars under the Benefit-in-Kind (BIK) regime, there’s some good news. The temporary universal relief of €10,000 on Original Market Value (OMV), introduced in 2023, has been extended for another year. Employees using electric company vehicles will benefit from a total BIK relief of €45,000 in 2025—this comprises an electric vehicle-specific relief of €35,000 plus the €10,000 universal relief. Additionally, there will be a BIK exemption for providing electric vehicle chargers at employees’ or directors’ homes.
Review of Taxation on Share-Based Remuneration
A new report on share-based remuneration taxation has been published and can be found here. The Minister will review its recommendations, with potential adjustments to follow.
Other Notable Updates
- PRSI: The small company start-up relief from corporation tax is being enhanced by including a new qualification method via Class S PRSI contributions, benefiting small, owner-managed start-ups.
- PRSI Rate Changes: Adjustments might be necessary due to changes in the NMW, and further clarifications are expected from the Department.
For more details, check the following links:
In summary, the 2025 budget introduces significant changes to personal income tax, minimum wage, and benefit exemptions aimed at providing economic relief and cost of living. Additionally, adjustments to benefit exemptions aim to provide more comprehensive support for those in need.
By expanding eligibility criteria and increasing exemption thresholds, these changes are expected to offer greater financial stability for vulnerable populations.
Overall, these measures represent a concerted effort by the government to foster an equitable economic environment while promoting sustainable development. and support for both individuals and businesses. Notably, the alterations to personal income tax brackets are designed to alleviate the financial burden on middle-income earners, thereby stimulating consumer spending and economic growth.
The increase in the minimum wage reflects a commitment to improving living standards for workers across various sectors, ensuring that wages keep pace with inflation
