Cost of living: Tax for workers slashed from today - here's how you'll benefit from Budget 2025

Taxpayers across Ireland will start seeing the benefits of Budget 2025 starting from today, January 1.

The €1.6 billion package, which was announced in October, includes key measures intended to support lower and middle-income earners, with increases to tax credits, reductions in the Universal Social Charge (USC) and other changes aimed at easing the cost of living for renters and families.

A highlight of the changes is the increase in the standard rate cut-off point, which rises from €42,000 to €44,000 from today, with proportional increases for married couples and civil partners.

The personal, employee and earned income tax credits will also increase by €125 to €2,000, while several other credits benefiting families and carers will see boosts. These include the Home Carer Tax Credit, now worth €1,950, and the Single Person Child Carer Credit, which increases to €1,900.

READ MORE: All the social welfare payments increasing from today as minimum wage rises to €13.50 an hour

READ MORE: The exact day to take down Christmas tree to keep bad luck away

With these increases, a single person earning €20,000 or less in 2025 will no longer pay income tax, while those on lower incomes will see a reduction in their tax bills.

Another major change is the reduction in the USC rate, with the 4% cut now 3% - its second consecutive decrease. This comes as the national minimum wage rises by 80 cent per hour to €13.50, meaning minimum wage workers remain outside the higher rates of USC. The new threshold for the 3% USC rate will be raised by €1,622 to €27,382.

Some renters will also benefit, with the Rent Tax Credit for 2025 rising to €1,000, or €2,000 for jointly assessed taxpayers Additionally, the Rent Tax Credit for 2024 has been retrospectively increased to €1,000, with eligible tenants able to claim an additional €250 or €500.

Meanwhile, in an effort to encourage the uptake of electric vehicles, Budget 2025 has introduced a benefit-in-kind exemption for the installation of home chargers for battery electric vehicles by employers. This will apply to both directors and employees, making it easier for more people to access the infrastructure. The Finance Act 2024 has also amended the weight ratio requirement for commercial EVs, allowing more vehicles to qualify for the €200 category C Vehicle Registration Tax rate, which also takes effect today.

Speaking today, Minister Chambers said: “Several of the changes which I announced in Budget 2025 take effect from 1 January 2025. This includes a substantial personal tax package of €1.6 billion. With increases to the main tax credits and the standard rate cut-off point, together with reductions in USC, this package is primarily aimed at supporting those on lower and middle incomes, and builds on the progress already made by Government over its term. A number of tax credits are increasing to support individuals and families with caring responsibilities. My budget package will be of direct benefit for all those who pay income tax.

"As a result of the cumulative increases to the main tax credits, a single person earning €20,000 or less in 2025 will now be outside of the income tax net. As part of the continued support of renters, particularly with cost of living pressures, the value of the Rent Tax Credit is increasing to €1,000 for 2024 and 2025.

"I also announced two changes in Budget 2025 to incentivise the uptake of electric vehicles. The exemption so that a director or employee will not pay BIK on the installation of a home charger, and the amendment of the weight ratio requirement for commercial electric vehicles to qualify for the €200 category C VRT rate will also be effective from 1 January."

Join the Irish Mirror’s breaking news service on WhatsApp. Click this link to receive breaking news and the latest headlines direct to your phone. We also treat our community members to special offers, promotions, and adverts from us and our partners. If you don’t like our community, you can check out any time you like. If you’re curious, you can read our Privacy Notice.