Upcoming €900 Boost in Take-Home Pay for Many Irish Workers as New Tax Changes Take Effect Starting Wednesday, January 1, the fiscal changes outlined in Budget 2025 will come into force, leading to an increase in take-home pay for many employees.
Those earning upwards of €50,000 annually are projected to see an additional €900 in their earnings for the year 2025 due to these new tax reforms. As part of a comprehensive tax overhaul costing several billion euros, the government has raised the threshold for the higher 40% income tax rate from €42,000 to €44,000. Additionally, the two percent Universal Social Charge (USC) band will see an increase of €1,622, expanding it to €27,382.
Importantly, the four percent USC rate will be reduced to three percent. These adjustments are expected to significantly alleviate the tax burden for single earners surpassing the €50,000 mark, resulting in an estimated tax reduction of €859 next year. Moreover, there will be further benefits as the personal tax credit, the PAYE tax credit, and the earned income tax credit will each rise by €125, bringing them to a total of €2,000. The home carers tax credit will also see an increase of €150, rising to €1,950, while the dependent relative tax credit is being raised by €60 to €305.
In another significant change, the inheritance tax threshold for parents transferring wealth to their children will increase from €335,000 to €400,000. Public Expenditure Minister Paschal Donohoe emphasized that these tax reductions reflect Fine Gael’s successful management of the economy over recent years.
He stated, “I am pleased that 2025 will be yet another year in which people will benefit from favorable tax changes, putting more money back into their pockets. This marks the tenth consecutive year we have had the capacity to implement such tax adjustments, thanks to our careful oversight of the nation’s finances.” Donohoe further noted that Fine Gael remains committed to rewarding hard work, referencing new allowances for employers to provide their employees with bonuses totaling €1,500 up to five times a year. “While inflation is on the decline, it is essential to acknowledge that many households continue to face cost-of-living pressures. Therefore, it is crucial that we persist in implementing measures that return money to the public through this budget and beyond,” he added.
