Gerry Brown on key tax provisions in 2025 Irish Budget

UK Chancellor of the Exchequer, Rachel Reeves, must have looked enviously across the Irish Sea at her Irish counterpart, Jack Chambers, as he delivered his 2025 Budget last week, says Gerry Brown, trust and estate planning consultant at QB Partners. 

Compared with Reeves’ ‘black holes’, Chambers enjoyed a substantial budget surplus supplemented by a tax payment from Apple of €14bn (the subject of an eight year dispute between Ireland and the EU) and proceeds from the sale of shares in Allied Irish Banks.

Some noteworthy elements of the Irish Budget are as follows;

Income Tax
The Irish income tax system does not have a ‘personal allowance’ but taxpayers are entitled to various tax credits which reduce or even eliminate the tax charge. A single person earning €20,000 or less in 2025 will have no income tax liability.

The standard 20% rate band will increase to €44,000. Income above that limit will be taxed at 40%.

The Universal Social Charge (USC) was introduced at the height of the financial crisis in December 2010 to help shore up the public finances. It is a supplementary tax charge on most types of income and is charged at progressive rates from 0.5% to 11%. The 2025 Budget proposed a modest reduction in the USC.

Capital Acquisitions Tax (CAT)

Ireland’s version of the UK’s Inheritance Tax (IHT), CAT, is levied at a rate of 33%. As with IHT, transfers between spouses/civil partners are exempt. The tax charge falls primarily on the recipient of the gift or inheritance. Other transfers are tax free within specified limits depending on the relationship between the donor and donee as reflected in three ‘groups’.

The Group A threshold, which includes gifts or inheritances from parents to their children, will rise from €335,000 to €400,000.

The Group B threshold, which includes gifts or inheritances from siblings, will rise from €32,500 to €40,000.

The Group C threshold, which includes gifts and inheritances from those not in Groups A or B will rise from €16,250 to €20,000.

These are the first increases in thresholds since 2019.

Auto Enrolment (AE)

Ireland is introducing an Automatic Enrolment Retirement Savings Scheme (AE) which will be similar in many respects to the UK’s Workplace Pension Auto Enrolment regime. It is expected that AE will be introduced in September 2025.

The State will be making a direct contribution for employees within the AE scheme, so no tax relief will be provided for employee contributions.

Employer contributions will obtain tax relief and the growth in AE funds will be tax exempt. Funds will be taxed on drawdown - apart from a 25% lump sum.

This lump sum will be tax free up to €200,000, taxed at 20% between €200,000 and €500,000 and taxed at 40 % above €500,000.

Stamp Duty
Stamp Duty on homes worth more than €1.5m has been increased to 6%. The current 1% rate on residential properties valued up to and including €1m, and the 2% rate on properties valued above €1m but below €1.5m will continue.

Remittance Basis
There have been no changes to the Irish remittance basis rules. An individual, tax resident but non-domiciled in Ireland, is taxed on Irish source income or gains but may apply the remittance basis of taxation to any foreign income.

Foreign income or gains not brought into Ireland (while Irish tax resident) can thus accumulate tax free.There is no equivalent of the UK’s remittance basis charge and there are no deemed domiciled provisions.