Budget 2025

Now that we have all of the data from Budget 2025, lets review our Budget Predication blog from last week and see what came true and what remains on our wish list.

Key Issues to Watch in Budget 2025 here in Ireland:

• Old Age Pension Increase:
• It’s widely expected that the weekly old age pension will see an increase. While this move is politically popular, it raises concerns about long-term sustainability given the current financial pressures.

The state pension increased by €12 per week, certainly to be welcomed by those in receipt of the state pension as their cost of living has gone up so much over the last 3 years. But for those yet to receive this benefit how likely and affordable are future increases?

• Standard Fund Threshold for Pensions:
• The threshold, currently set at €2 million, may be increased. This potential change would allow individuals to accumulate larger pension funds, a welcome shift after years of stagnation in this area.

The SFT is increasing to €2.8 million by 2029. From 2026 it will increase by €200,000 per annum for 4 years.

• Inheritance Tax Adjustments: 
• With widespread media coverage, there is speculation that the tax-free threshold of €335,000 from parent to child could be raised, or the existing tax rate of 33% may be reduced. Both changes would significantly impact estate planning and wealth transfer strategies.

The CAT Thresholds have all been increased, Group A to €400,000, Group B to €40,000 and Group C to €20,000. As assets prices has risen so much over the last 4 years this is a welcome change for any families looking manage their estate tax efficiently.

• Exit Tax on Investment Funds:
• Currently set at 41%, the exit tax on investment fund gains might be reduced to align more closely with the 33% Capital Gains Tax on individual shares. While it’s unclear if this change will be enacted this year, the topic has gained considerable attention.

So far there has been no change, maybe we might see something In the finance bill next week but that seems unlikely at this stage. This one is really disappointing since there was a huge increase in tax relief for Angel Investors. Something needs to be done for families who want to save and invest so they can live meaningful and dignified retirement.

What We’d Like to See Change or Remain the Same:

• PRSA Contributions for Business Owners: The ability for business owners to quickly build up their pension pots via PRSAs is crucial. This incentive supports those who take the significant risk of setting up businesses, the backbone of our economy. We strongly believe this benefit should remain unchanged to continue fostering entrepreneurship in Ireland.

There was no mention of changes to unlimited employer contributions to PRSAs. This is great news for business owners and can continue to save tax efficiently through their PRSA.

• Increase the Entrepreneurs Relief Cap: Currently capped at €1 million, Entrepreneurs Relief needs to be raised to better support and retain startups in Ireland. The existing cap is insufficient given the high costs and risks of entrepreneurship today.

Although there was no change to this relief, there was a tweak to proposed changes in Retirement Relief. For transfer from parents to children working in a business the gift now be fully exempt from CGT provided certain conditions are met.

What Should You Do Now:

• Pension Funds Nearing €2 Million: If your pension fund is close to the €2.15 million threshold, consider holding off on changes until after the budget, as new regulations may offer more room to grow your pension.

You need to get financial advice at this point and we would strongly consider the following options:

1. Delay/Defer the drawdown of your pension until 2029 if you have other sources of income and assets. Let your pension fund continue to grow and compound tax free
2. If you can, you may want to consider further top ups to your pension over the next few years, talk to your financial advisor to see how much more scop you have between now and 2029
3. Make sure your pension is in a PRSA if you are delaying the drawdown to 2029. In the event of your death while in a PRSA, all of your pension is paid tax free to your estate.

We’re on standby to answer any of your budget related questions, please feel free to reach out to the team.