Budget 2025 may have been pitched as a giveaway pre-election budget, but families across the country may be scratching their heads next January when they see - or struggle to see - the difference the changes make to their pay cheques.
Yes, those with children or subject to weekly payments such as the State pension will benefit. But, by opting for once-off measures – after all, child benefit hasn’t actually increased, it will just be paid as a bonus this year, while the increase in the small benefit exemption (up to €1,500), for example, will only apply to those who get a bonus from their employer – the Government has kept a lid on its spending for the years ahead.
So, when looked at from an income tax perspective, the changes aren’t as significant.
“It leaves more money in employees’ and income earners’ pockets, but no massive turning of the dial when it comes to income tax burdens,” says Katie O’Neill, a director with PwC.
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And the higher cost of living means that much of the increase in take-home pay will be eroded.
“Whilst inflation has slowed, the cost of living is still higher than before,” O’Neill says.
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Indeed, once the electorate pleasing one-off measures, such as the children’s allowance bonus, energy grants and mortgage interest relief extension are removed, our families don’t look like they’ll suddenly be booking a cruise to the Caribbean anytime soon.
Or even paying for an extra takeaway each month.
Consider Rebecca, our worker on earnings of €22,000 a year. Because of the recent increase in PRSI (it increased from 4 per cent to 4.1 per cent as of October 1st), she will actually get to keep less of her income next year than she did this year. As our table below shows, she will be short €17 a year.
According to O’Neill, this is because the shift in the standard rate doesn’t affect her, as her income is below this (it was increased to €44,000 for a single person), and she also doesn’t benefit from the tax credit changes (increase of €125 in personal/employee/earned income tax credit) due to her income tax being low and already covered by credits.
Hard to believe, perhaps, when Minister for Finance Jack Chambers said that the goal of the budget is to “support low- and middle-income earners”.
Those earning in the mid-€40,000s will do better, thanks to the increase in the standard rate band. Jian and Sean, for example, with an income of €47,500 will get to keep an additional €735 of their income this year – although that only works out as a gain of about €61 a month.
Pensioners on the other hand, will typically fare better, thanks to the €12 increase in their weekly State pension, which amounts to a gain of €624 a year, or €1,248 for a couple. When combined with tax changes, it means that our pensioner couple fares the best this year.
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They may also benefit – or at least their estate, most likely their children, will – from the jump in the tax-free threshold to €400,000. As O’Neill notes, while it’s the first increase since 2019, it is in fact the first “significant” increase since 2011.
“As property prices have steadily increased this will be a welcome measure for many in helping to ensure that the inheritance of the family home remains outside of the inheritance tax net,” she says.
On the housing front, would-be home buyers may be pleased that the rent credit was increased, as this may help them save a little more towards a home purchase. This has increased by €250 a year – and the change will kick in now, so those eligible will see the increase this year and next.
They may also welcome the fact that Help to Buy was extended until the end of 2029 -– although some might be disappointed that the ceiling of €500,000 wasn’t increased.
The decision to increase stamp duty on the cost of homes in excess of €1.5 million to 6 per cent may dissuade our high-earning couple, Mark and Linda, from making a move – whereas such moves are encouraged because they keep the property chain moving.
As landlords, they may also have been expecting something more than the extension in the relief for pre-letting expenses, which is worth up to €10,000. This relief will now continue until the end of 2027.
Our Budget Families
Single parent public sector worker Tom
Net annual gain €742
Tom is 30 years old and a single parent. He lives and works in north Co Dublin, as a nurse. Tom earns €36,000 a year. He is paying €1,000 for a two-bed apartment. However, he would like to get on the property ladder soon and is hoping to use the Help to Buy scheme to help get his deposit together.
Single-income family Jian and Sean
Net annual gain €735
Jian and Sean are in their late 30s. They live in Kilkenny in a four-bed semidetached house. They have two children aged 13 and seven. Jian is a pilot. He gave up his job over 10 years ago when their son was born, and has now returned to work. Sean, who used to work full-time in a tech company, now stays at home with their children. Their annual income is €47,500.
They also receive rent from renting out a room in their home and have boosted their income by €10,000 a year thanks to the rent-a-room scheme. This is within the current tax-free limits of €14,000, so they receive this amount, tax free, on top of Jian’s salary.
Pensioners Leslie and Kitty
Net annual gain €1,499
Leslie and Kitty are married and living in Cork. They own their family home, having paid off their mortgage. Leslie and Kitty are in their late 70s. Leslie receives an occupational pension of €22,000 along with the State contributory pension and deposit interest. Kitty also receives the State contributory pension. Thanks to the budget-day move to increase their pension by €12 a week, they now have a total income of €52,087.
Low-income worker Rebecca
Net annual loss €17
Rebecca is 33 years old. She worked full-time as a waitress and moved out of her family home in 2019 to rent a one-bedroom apartment. She works as a customer service representative for an online retailer, remotely from home. Her annual earnings are €22,000 a year.
Dual-income family Ekene and Alison
Net annual gain €1,227
Ekene is married, in his 50s, and lives in Louth with his wife Alison. Ekene is a self-employed hotelier. Alison has a part-time job as a beautician and earns a salary of €23,000.
They have four children, two of whom live at home. Ekene’s annual income over the last number of years was €152,000.
High earners Mark and Linda
Net annual gain €1,774
Mark and Linda are in their early 40s with two children. They live in a €1.5 million four-bed detached house they own in Dún Laoghaire. Both Mark and Linda are accountants, and they earn a combined annual salary of €300,000, with both working from home a number of days each week. They own a rental property that has an annual rental income of €25,000.
