Budget 2025: What do the tax changes mean for your pocket?

Ireland’s Budget 2025 has arrived, bringing tax relief to workers across the country.

Announced by Finance Minister Jack Chamber and Public Expenditure Minister Paschal Donohoe, the core budget package is expected to exceed €8 billion.

To help you understand what this means for you, we’ve broken down the key points from today’s Budget.

Want to see how these changes affect your pay? Check out our Budget 2025 Calculator below!

Tax rate bands change

The government has announced an increase in the tax rate bands.

As with last year, the threshold for the higher 40% tax rate will rise by €2,000, moving from €42,000 to €44,000. 

This means you will pay 20% tax on the first €44,000 of income and 40% on anything above that.

Therefore, you can now earn an additional €2,000 before reaching the higher 40% tax bracket.

USC cuts

The government has reduced the rate of USC by 1% on incomes ranging from €25,000 to €70,000.

Last year, there was a 0.5% cut, which was the first reduction in the tax after many years.

The Finance Minister has now brought in these cuts targeting those earning between €25,000 and €70,000.

This is the largest USC cut to date, with the government keen to target low-middle earners with a tax break.

Rent Tax Credit

Renters nationwide will be delighted to hear that the Rent Tax Credit has increased to €1,000. This amount will be backdated to 2024, meaning that for both 2024 and 2025, the Rent Tax Credit will be €1,000 per person.

The Rent Tax Credit was originally brought back in 2022, when those who were eligible could claim up to €500, which was increased to €750 in 2023, and now has been increased by a further €250.

This applies to qualifying renters and even students living in digs accommodation.

Meanwhile, married couples can claim €2,000 if filing jointly.

Tax credit increases

There were also numerous changes to measures aimed at carers announced in the Budget.

The following will be increased:

• The Home Carer Tax Credit by €150 to €1950.

• The Single Person Child Carer Credit by €150 to €1900.

• The Incapacitated Child Tax Credit by €300 to €3500.

• The Dependent Relative Tax Credit by €60 to €305.

• The Blind Tax Credit will be increased by €300 to €1950.

What else was announced in the Budget?

Social welfare increases

All those who receive social protection support, such as pensioners, carers, unemployed people, and people with disabilities will benefit from this budget with a €12 weekly payment increase.

Help to Buy scheme

The Help to Buy scheme has been extended until 2029.

It allows first-time buyers to claim up to €30,000 in income tax they’ve paid over the previous four years. This reclaimed amount can be used towards the home deposit.

Energy credit

Similar to the 2024 Budget, energy credits are included in this Budget announcement.

Households will receive a total energy credit of €250, divided into two payments of €125—one before the end of 2024 and the other at the beginning of next year.

This is an increase from last year’s €150 per household, however, this year there are only two payments compared to three last year.

What will this mean for your pocket?

It’s fair to say that Budget 2025 will impact everyone differently.

Due to the USC and income tax reduction package, most workers will be happy to hear they are going to be paying less tax in the new year.

There’s also a good chance you could avail of the Rent Tax Credit if you rent a property in Ireland!

Remember, this credit was introduced in Budget 2023, and even if you’ve already claimed it in 2023 and 2024, you will be able to do so in 2025.

The easiest way to claim the Rent Tax Credit? With Taxback! 

Every year, countless workers in Ireland miss out on claiming their Irish tax entitlements.