Irish Minister for Finance Jack Chambers on 1 October 2024 announced the budget for 2025, which he said “puts the country on a firm footing for the future.”
The minister announced some income tax measures that will impact employment taxation in Ireland.
The Irish government introduced legislation in April 2023 to reduce the taxable BIK on company cars for the 2023 tax year only. This was achieved by allowing a EUR 10,000 reduction to the vehicle’s original market value. This reduction applied to all company cars other than those cars that fell into the highest CO2 emissions category (more than 179g/km). This temporary relief has now been extended to 2025.
The minister also announced that tax relief applicable to electric cars will remain at EUR 35,000 for 2025. Furthermore, electric vehicles will continue to qualify for the EUR 10,000 relief described above; thus, the total relief for electric vehicles in 2025 will be EUR 45,000.
The provision of a facility for charging electric vehicles at the home of a director or employee will be treated as a tax-exempt benefit effective 1 January 2025.
The small benefit exemption allows employers to give employees up to two small tax-free benefits every year. These benefits must not be in cash, and the combined value of the two benefits cannot exceed EUR 1,0000. The exemption allows employers to provide non-cash benefits such as vouchers or small gifts without incurring income tax, PRSI, or USC liability.
The minister announced that small benefit exemption limit will increase to EUR 1,500 and the number of benefits that an employer can give will increase from two to five per year.
While not part of the budget speech, as these rates changes were already included in the Social Welfare Miscellaneous Provisions Act 2024, the rates for all classes of PRSI will increase initially by 0.1 percentage point from 1 October 2024, followed by further increases from October 2025 to October 2028. The proposed rate changes are as follows:
Minister for Social Protection Heather Humphreys announced on 29 September that the government's new auto-enrolment pension scheme will enter into effect on 30 September 2025. This new scheme will apply to all employees between the ages of 23 and 60 who are not members of an approved pension scheme. Contributions will be payable from that date for employees and employers.
Standard Fund Threshold
The Standard Fund Threshold (SFT) is a limit on the amount of benefits an individual can accrue from Irish pension arrangements. The SFT has been set at EUR 2 million since 2014. This limit will be increased to EUR 2.8 million between 2026 and 2029. From 2030, the SFT will be indexed in line with wages growth.
The amount of the lump sum that will be taxable at the higher rate will be fixed at EUR 300,000 and will not be linked to the rising SFT.
The charge on excess funds will remain at 40% until at least 2030.
In December 2023, the minister announced the launch of an independent consultation process on share-based remuneration. The report arising from that review was published on 1 October 2024. Its recommendations are broadly positive and designed to balance the objective of maintaining or improving Ireland’s competitive position while reducing the increasing Exchequer costs of share-based schemes.
Mark Hynes
BDO in Ireland
The minister announced some income tax measures that will impact employment taxation in Ireland.
Benefit in Kind Regime for Company Cars
The Irish government introduced legislation in April 2023 to reduce the taxable BIK on company cars for the 2023 tax year only. This was achieved by allowing a EUR 10,000 reduction to the vehicle’s original market value. This reduction applied to all company cars other than those cars that fell into the highest CO2 emissions category (more than 179g/km). This temporary relief has now been extended to 2025.The minister also announced that tax relief applicable to electric cars will remain at EUR 35,000 for 2025. Furthermore, electric vehicles will continue to qualify for the EUR 10,000 relief described above; thus, the total relief for electric vehicles in 2025 will be EUR 45,000.
BIK Treatment of Battery Electric Vehicle (BEV) Home Chargers
The provision of a facility for charging electric vehicles at the home of a director or employee will be treated as a tax-exempt benefit effective 1 January 2025.
Small Benefit Exemption
The small benefit exemption allows employers to give employees up to two small tax-free benefits every year. These benefits must not be in cash, and the combined value of the two benefits cannot exceed EUR 1,0000. The exemption allows employers to provide non-cash benefits such as vouchers or small gifts without incurring income tax, PRSI, or USC liability.The minister announced that small benefit exemption limit will increase to EUR 1,500 and the number of benefits that an employer can give will increase from two to five per year.
PRSI Rate Changes
While not part of the budget speech, as these rates changes were already included in the Social Welfare Miscellaneous Provisions Act 2024, the rates for all classes of PRSI will increase initially by 0.1 percentage point from 1 October 2024, followed by further increases from October 2025 to October 2028. The proposed rate changes are as follows:Pensions
Auto-enrolmentMinister for Social Protection Heather Humphreys announced on 29 September that the government's new auto-enrolment pension scheme will enter into effect on 30 September 2025. This new scheme will apply to all employees between the ages of 23 and 60 who are not members of an approved pension scheme. Contributions will be payable from that date for employees and employers.
Standard Fund Threshold
The Standard Fund Threshold (SFT) is a limit on the amount of benefits an individual can accrue from Irish pension arrangements. The SFT has been set at EUR 2 million since 2014. This limit will be increased to EUR 2.8 million between 2026 and 2029. From 2030, the SFT will be indexed in line with wages growth.
The amount of the lump sum that will be taxable at the higher rate will be fixed at EUR 300,000 and will not be linked to the rising SFT.
The charge on excess funds will remain at 40% until at least 2030.
Share-Based Remuneration
In December 2023, the minister announced the launch of an independent consultation process on share-based remuneration. The report arising from that review was published on 1 October 2024. Its recommendations are broadly positive and designed to balance the objective of maintaining or improving Ireland’s competitive position while reducing the increasing Exchequer costs of share-based schemes.Mark Hynes
BDO in Ireland