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Budget 2025: Tax cut, mortgage interest relief and other measures in Coalition’s final roll of the dice

USC, inheritance tax, childcare, child benefit, social welfare, college fees, VAT rate: How the budget will affect parents, students, renters, mortgage holders, farmers, pensioners and carers

Budget
Budget 2025: Minister for Finance Jack Chambers tabled the most eye-catching tax measure - a one 1 per cent cut in the universal social charge (USC) for incomes between €25,000 and €75,000. Illustration: Paul Scott
Jack Horgan-Jones
Cormac McQuinn
Sat Sept 28 2024 - 06:00

As budget day creeps closer, the dominoes are beginning to fall on the last tax and spending package from this Fine Gael-Fianna Fáil-Green Coalition.

The broad outline has been in place for months: €1.8 billion in new spending, €1.4 billion in tax cuts, and at least €1.5 billion in once-off payments. Expect those numbers to creep up, with a general election on the cards in the coming months – and they will be supplemented with the proceeds of AIB share sales, earmarked for infrastructure spending. And then there are the billions of euro flowing from the €13 billion in back taxes that US tech giant Apple has had to pay the State at the direction of the EU.

All told, the budget can be a bewildering spin zone of numbers, policy and politics. But with an election looming, what can you expect in your pocketbook as the Coalition rolls the dice for a final time?

Your tax bill

Undoubtedly the most eye-catching tax measure is a 1 per cent cut in the universal social charge (USC) for incomes between €25,000 and €75,000, tabled by Fianna Fáil Minister for Finance Jack Chambers. An increase to the entry point for the higher rate of income tax is also expected, of about €2,000. Chambers has suggested an average worker will benefit from the budget to the tune of €1,000 between tax changes and cost-of-living measures. Both Fine Gael and Fianna Fáil want to make changes to inheritance tax. An increase in the tax-free threshold that applies to children inheriting from parents from €335,000 to €400,000 is considered likely.

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For parents

There will be no further cuts to childcare fees, with Green Party Minister for Children Roderic O’Gorman said to be eyeing an expansion of the core funding scheme to supplement providers as more children flow into the system. The mood music was bad as of Friday, with suggestions he was seeking more for this than the entire department had been offered for new measures. One-off payments are the order of the day for many parents – a double child benefit payment before Christmas looks locked in, while the Greens are pushing for their “baby boost” – a quadruple payment of child benefit for parents of newborns. A €10 boost to the child benefit looked to be receding in probability – but not gone yet.

For school-going children, it will be a major shock if an expansion of the free schoolbooks for senior cycle secondary school students doesn’t transpire. Funding for at least 1,500 special needs assistants is being sought by Fianna Fáil Minister for Education Norma Foley. There will be a need for 350 extra special classes next year.

For students

A further cut to the €3,000 registration fee is still in the balance going into the final days of budget negotiations. Fine Gael Minister for Higher Education Patrick O’Donovan is pushing for €500 on top of the €1,000 “once-off” reductions in recent years, which would halve the cost for next year – and for it to be made permanent. He looks to have secured a 15 per cent across-the-board increase in the income thresholds for Susi education grants. There is likely another €150 million in new funding for third-level institutions, spread over five years. A €750 tax break for young people trailed by Fine Gael Minister for Enterprise Peter Burke looks unlikely.

For renters, homebuyers and mortgage holders

Renters will receive a €250 top-up to their €750 tax credit for this year and next, bringing the total to €1,000 a year per renter. Expansion of the Help to Buy scheme looks unlikely, with tweaks allowing renters to access the top payment of €30,000 not favoured – nor were changes to the house price limit of €500,000 for the scheme. But it will be extended for another year to the end of 2026. There will be extra money for Fianna Fáil Minister for Housing Darragh O’Brien’s array of home purchase and social and affordable housing schemes, while an extension of the €1,250 mortgage interest relief introduced in the last budget is on the cards. It remains to be seen whether there are higher grants for dereliction on the table, with an increase from the €70,000 grant being sought. Meanwhile, all households are likely to get another electricity credit before Christmas. This time it is set to be €250, down from the three payments totalling €450 last year.

For the health service

Health received a massive €22.5 billion in funding for 2024 but the Government had to top this up to the tune of €1.5 billion after it became evident there would be an overspend. It appears that funding to maintain existing levels of service in the health service for 2025 has been agreed as far back as the summer economic statement in July with funding of almost €1.2 billion being earmarked.

Aside from that, high on the list of budget asks from Fianna Fáil Minister for Health Stephen Donnelly is funding to staff extra beds in the system. Some 300 hospital beds alone could open next year, provided the funding is there to staff them. Expansion of State-funded assisted human reproduction has been floated, though it is uncertain if this will be included. Free prescription contraception to women over the age of 35 has also been under consideration. Extending the scheme to 16-year-olds – which is said to be “legally complex” – is not expected to happen in Tuesday’s budget. Talks on health may go down to the wire on Monday.

For business

The campaign for a 9 per cent VAT rate for hospitality remains undimmed, but the smoke signals are not promising, with Government sources saying it would boil down to that tax cut or an income tax package. There may be a halfway house available, but a broad-based scheme for business is also not confirmed. The Greens pitched a rates rebate, but a Fine Gael source was dismissive of this last week. However, increases to the employer’s PRSI threshold for lower-paid workers look likely to offset the impact of an anticipated rise in the minimum wage. Burke is also seeking changes to the research and development (R&D) tax credit, a capital gains tax (CGT) cut for entrepreneurs, a cut in alcohol duty to help hospitality and a VAT cut for broadband bills.

For farmers

Fianna Fáil Minister for Agriculture Charlie McConalogue is understood to be pushing for improved schemes to support a wide variety of farmers including those with sheep, beef and dairy/beef farms. He wants to see supports for sheep farmers increase by €5 to €25 per ewe and funding is also set to be secured for the €100-per hectare support for tillage farmers who planted in 2024. Talks also focused on ensuring funding for existing agriculture schemes such as the Acres payment to support environmentally friendly farm practices, which saw 55,000 farmers sign up – 10 per cent more than originally envisaged.

For public transport users and drivers

The 20 per cent cut to the cost of public transport is set to be extended for another year. The Green Party has proposed extending free public transport to children under the age of nine (currently it only covers the under-fives) both to save families’ money and reduce emissions by encouraging the use of public transport. Again, at a cost of €8 million it is not massive money should the proposal end up in the budget.

James Lawless, the Fianna Fáil Minister of State at the Department of Transport, has been pushing for a funding shortfall of some €40 million for road improvements to be addressed as part of budget talks.

Welfare, carers and disability

Social Protection is another Department where negotiations are set to continue over the weekend. Minister for Social Protection Heather Humphreys (Fine Gael) has said she would like to see welfare increases targeted at those who need them most: pensioners, carers and the disabled. Proposals for €15 increases to the State pension, carer’s allowance and disability payments, with perhaps a lower increase for jobseeker’s payments have been mooted. However, there has been resistance to this from some in Fianna Fáil and the Green Party. At this point it appears that across-the-board welfare increases, perhaps matching the €12 per week announced last year, are more likely. Humphreys has suggested she wants to extend fuel allowance to those over the age of 66. At present, it is available to those aged over 70. Sources said on Friday that nothing has been agreed in relation to the Social Protection budget as yet.

Disability spending was a major sticking point heading into the final weekend, with Minister of State Anne Rabbitte (Fianna Fáil) seeking a whopping €230 million in new measures. That has already been slashed to a €130 million request, but it is many miles from the department-wide offer said to be about €60 million.

For media and the arts

Next to nothing has so far emerged from the talks between the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media Catherine Martin (Greens) and Paschal Donohoe (Fine Gael), the Minister for Public Expenditure and Reform.

It is known that the budget will include €42 million in exchequer funding for cash-strapped and controversy-hit RTÉ along with an expected €78 million worth of free TV licences to groups such as pensioners. Martin confirmed on Wednesday she is not seeking any additional money for RTÉ.

Despite an ambition to expand the basic income for the arts scheme, Martin says the outcome of the pilot scheme is awaited so it will be kicked out for the next government to handle.

For policing, justice and defence

It has been remarkably quiet in this area when it comes to pre-budget jockeying: expect further allocations for more Garda recruitment and equipment to be sought, and keep an eye on whether the green light is given to fee restoration for criminal barristers – an issue on which there have been regular protests.

For the Defence Forces, a lot of investment has already been allocated under the approved modernisation plan, and there will be an extension of the seagoing Naval personnel tax credit for another five years in the budget. There will be funding for hundreds more personnel, cash for external expertise, and capital funding for new radar and subsea capabilities, with a “record allocation” promised overseas development in the Department of Foreign Affairs.