What can we expect from Budget 2025

Taxation and business impact

Budget 2025 will likely introduce changes aimed at easing the tax burden, with a particular focus on personal taxation. For business owners, it’s important to note the potential increase in the standard rate tax band, which could rise from €42,000 to €44,000, offering higher earning employees some relief. This will be accompanied by increases in tax credits and a likely reduction in the Universal Social Charge (USC) from 4% to 3.5%, which will put more money in the pockets of workers, potentially boosting disposable income and consumer spending.

Changes to the inheritance tax threshold may also be relevant to family-run businesses. The current tax-free threshold for children inheriting from parents is expected to increase from €335,000 to €400,000, potentially offering greater flexibility in long-term succession planning.

Meanwhile, the Government is also expected to scrap plans to impose a capital gains tax liability on family businesses worth over €10 million, which will be welcome news for those planning generational transitions within their businesses.

Minimum Wage and PRSI adjustments

For employers, one of the most important considerations in Budget 2025 will be the expected rise in the national minimum wage, from €12.70 to €13.50 per hour. While this change is intended to support low-paid workers in coping with inflation, it brings higher wage costs for businesses. To offset this, the Government is likely to raise the threshold for employer PRSI contributions, allowing businesses to pay the lower rate of 8.8% up to a new, higher level.

The adjustment to the PRSI threshold, which is expected to move above the current €496 limit, will help mitigate the financial impact of minimum wage increases. This should provide some relief for employers, especially those managing tight payroll budgets in industries such as retail and hospitality.

Business supports and grants

As the business environment continues to face pressures from inflation and rising costs, Budget 2025 is likely to include additional supports to ease the strain. There is ongoing pressure from business groups for the Government to introduce targeted grants and tax reliefs to support small- and medium-sized enterprises (SMEs).

Energy and Cost-of-Living supports

Budget 2025 will also include significant measures to address rising energy costs, which remain a key concern for businesses. The reduced VAT rate on electricity and gas is expected to be extended through the winter months, providing much-needed relief for energy-intensive sectors. This extension is likely to offer immediate savings on operational costs for businesses that have seen utility bills soar in recent years.

Beyond energy, the Government is allocating around €1.5 billion for general cost-of-living supports. Although largely targeted at households, measures such as energy credits and public transport subsidies will have a trickle-down effect, potentially boosting consumer confidence and spending, which could benefit businesses across various sectors.

Childcare and workforce productivity

With businesses increasingly focused on attracting and retaining talent, Budget 2025’s investment in childcare is a crucial development. The €1.2 billion earmarked for childcare aims to improve accessibility and affordability for working families, which could indirectly enhance workforce participation and productivity.

The Government is also likely to maintain its support for education, with free schoolbooks for Leaving Cert students and a reduction in third-level fees by up to €500. By reducing the financial burden on families, these measures could have long-term benefits for businesses, particularly in ensuring a well-educated and supported future workforce.

VAT and hospitality

For businesses in the hospitality sector, VAT will remain a key focus. Despite pressure from industry groups, the Government has indicated that there will be no return to the 9% VAT rate, which was reinstated to 13.5% last year. However, there are still ongoing discussions about whether restaurants and cafes may receive some relief in the form of a sector-specific VAT reduction. If implemented, this could offer a boost to hospitality businesses, many of which are struggling with rising costs.

In other sectors, cigarette taxes are expected to rise again, and a new tax on vaping products could be introduced, which may affect businesses in the tobacco and retail industries. However, specific details are yet to be confirmed.

The broader outlook

As with any budget, Budget 2025 will require careful consideration by business owners. While there are some positives—such as tax reliefs, PRSI threshold adjustments, and energy supports—businesses must also prepare for the challenges posed by rising wages, inflation, and VAT decisions.

The overall budget package is set to be around €10 billion, with a focus on balancing short-term relief for households with long-term investment in critical areas like childcare, education, and infrastructure. For business owners, the key takeaway is that while some immediate supports will be available, strategic planning for cost increases—especially around wages and energy—will be essential for navigating the year ahead.