Budget 2025 Summary
Corporate News Subtitle
Minister for Finance, Jack Chambers T.D., and Minister for Public Expenditure and Reform, Paschal Donohoe, T.D., today delivered details of Budget 2025. In setting taxation policy, the Government has identified a number of key objectives including supporting households, supporting commitments on housing, supporting business and helping with the cost of living.
There was no mention of any PRSA changes or indeed changes to the Standard Fund Threshold (although the Minister did make a statement on the Standard Fund Threshold on 18 September – see details below).
However, there may be additional pension related changes announced in next week’s Finance Bill.
Auto Enrolment (AE)
The Government’s new and long anticipated auto-enrolment scheme will begin on 30 September 2025. The new start date was agreed by the Cabinet this week and revealed by Minister for Social Protection, Heather Humphreys. The scheme will mean that 800,000 workers will be automatically added into this regime. The tax treatment aligns as much as possible with that of Personal Retirement Savings Accounts (PRSAs), other than for employee contributions. Employer contributions are tax relieved, the growth in the AE funds is exempt from tax and the AE funds are taxed on draw down, other than a 25% lump sum. The lump sum can be taken tax free up to €200,000, is taxed at 20% between €200,000 and €500,000 and is taxed at 40% above €500,000. As the State is making a direct contribution for employees within the AE scheme, there is no tax relief being provided for employee contributions to AE.
Standard Fund Threshold
An independent expert review was published on 18 September 2024. The Minister for Finance issued a statement on the review on the same day. There is to be a phased increase in the Standard Fund Threshold from €2 million to €2.8 million, starting in 2026 with annual increases of €200,000 in 2026, 2027, 2028 and 2029. There is no immediate increase to the Standard Fund Threshold. Chargeable excess tax is expected to be maintained at a rate of 40%. More details may be available in next week’s Finance Bill.
Capital Acquisitions Tax (CAT) Thresholds
CAT is a tax that applies to both gifts and inheritances. For CAT purposes, the relationship between the person giving a gift or inheritance (i.e. the disponer) and the person who receives it (i.e. the beneficiary) determines the maximum amount, known as the “Group threshold”, below which CAT does not arise. The standard rate of CAT is 33% in respect of gifts and inheritances taken on or after 6 December 2012. An increase to the thresholds for gifts or inheritances will apply as follows:
- CAT A Threshold to €400,000
- CAT B Threshold to €40,000 and
- CAT C Threshold to €20,000.
Retirement Relief
Finance Act 2023 increased the age parameters and introduced a cap on Retirement Relief of €10 million. Finance Act 2024 retain the increased upper age limit and will introduce a clawback period of 12 years for relief available for disposals over €10 million, after which the CGT will be abated. These changes are to ensure that the intergenerational transfer of Irish family businesses continues to be supported by the tax system.
Social Protection
There will be an increase of €12 per week for an individual in receipt of a weekly Social Protection payment. These increases are part of the Government’s commitment to improving the standard of living for pensioners and addressing cost of living issues.
Motor Insurers Insolvency Compensation Fund
The levy will reduce from 1% to 0% from 1 January 2025.
Review of Funds Sector
The Minister for Finance referenced the recent consultation on the ‘Funds Sector 2030’ and noted that the report has now been finalised and will be presented to Government shortly.
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Aviva Budget 2025 Summary
