The key private business, employment and individual tax measures introduced in the Bill include:
- With effect from 1 January 2025, transfers of a qualifying business in excess of €10m to a child will be subject to a clawback period of 12 years. If the business is not disposed of by the child in this period, the capital gains tax (CGT) will be abated.
- The lifetime limit of €3m on gains for CGT angel investor relief purposes has been increased to €10m.
- The CAT thresholds have all been increased. The Group A threshold has increased to €400,000; the Group B threshold has increased to €40,000, and the Group C threshold has increased to €20,000.
- Amendment to the Employment Investment Incentive to increase the investor limit to €1m, extend the self-certification deadline for the regime and to amend the rate to 35% for certain follow-on investments to comply with EU state aid rules.
- The Start-Up Refund for Entrepreneur scheme limit has been increased to €140,000 per annum over seven years with a new maximum total of €980,000. The rate for follow-on risk investments has also been increased to 35%.
- There has been a further extension to the temporary universal relief applied to cars within emissions categories A–D (and all vans) for company car benefit-in-kind (BIK) purposes.
- An exemption from BIK has been introduced where an employer provides a facility for the charging of a company-provided electric vehicle at the qualifying residence of a director or an employee. For the relief to apply, the employer must retain ownership of the charging facility.
- A welcome increase in the Small Benefit Exemption threshold to €1,500. The number of qualifying benefits has also been extended from two to five, with the first five gifts/benefits qualifying for relief where more than five are provided.
- There has been an increase in the 2% Universal Social Charge (USC) threshold and the 4% USC rate has been cut to 3%.
- The standard rate cut-off point has been increased by €2,000.
- The personal tax credit, employee PAYE and earned income tax credit have been increased by €125 each.
- The home carer credit has been increased by €150.
- The single person child carer credit has been increased by €150 and the incapacitated child tax credit has been increased by €300. The dependent relative tax credit has been increased by €60. The blind person’s tax credit has also been increased by €300.
- Renters will get a welcome increase to the existing rent tax credit. The credit will be increased to €1,000 for individual renters, or €2,000 per year for jointly assessed couples. The increased rent tax credit will also be applied to 2024 as well as 2025.
- The help-to-buy scheme has been extended to the end of 2029.
- Certain mortgage holders will be eligible for limited mortgage interest relief for 2024 only.
- Split year relief measures for those arriving into or departing from Ireland will apply in cases where the relief is not specifically sought by the individual during the year in question, with the relief instead capable of being claimed via the individual’s personal tax return for that period. This change will take effect for cases where an individual arrives in or departs from the State on or after 1 January 2025.
- On a related note, a brief reminder that employers and employees will each face a 0.1% increase in social taxes (PRSI) from October 2024. An additional 0.1% increase in PRSI will also take effect from October 2025.
Employment Investment Incentive
Finance (No. 2) Act 2023 brought a number of changes to Employment Investment Incentive (EII) relief to ensure the relief complied with amended EU state aid rules. The most fundamental change concerns the rate of tax relief. Finance (No. 2) Act 2023 restricted the maximum effective rate of EII relief for follow-on investments to 20%. This change was implemented based on an initial interpretation of EU state aid rules. However, upon further developments, it appears that there is flexibility in the EU state aid rules for the 35% rate to apply to follow-on risk finance investments where the company is in existence for less than ten years or within seven years of its first commercial sale. Finance Bill 2024 has recognised this rate of relief on a retrospective basis for shares issued on or after 1 January 2024. This is a welcomed change for the Irish scale-up sector.
Other relevant changes to the regime were:
An extension to the deadline for processing the relief from four months post year-end to 31 December in the year following the year in which the shares were issued.
The extension of the operation of the relief to 31 December 2026.
The amount upon which an investor can claim tax relief under the scheme has increased from €500,000 to €1m.
Start-Up Refunds for Entrepreneurs
The amount of Start-Up Refunds for Entrepreneurs (SURE) relief that an investor can claim annually has been increased from €100,000 to €140,000. This results in a total maximum of €980,000 over the seven-year period.
For SURE relief being claimed where a loan is converted to eligible shares, a business plan must be in place in advance of the date of the issue of the loan.
The same change for the rate of relief from 20% to 35% for follow-on EII investments also applies to SURE claims.
Start-Up Relief S486C TCA 1997
For accounting periods beginning on or after 1 January 2025, in addition to providing the current relief relevant to the amount of employer’s PRSI borne by the company, relief will also be available by reference to the amount of Class S PRSI paid by a director of the company. This is subject to a maximum of €5,000 employer’s PRSI per employee, €1,000 Class S PRSI per company director and €40,000 overall.
R&D tax credit
The amount of refundable R&D tax credits that can be paid to a company in a year has been increased from €50,000 to €75,000.
CGT retirement relief
Finance (No. 2) Act 2023 increased the age limits for CGT retirement relief purposes from 65 years to 69 years. However, it also introduced a new maximum limit of €10m on disposals of qualifying assets to children up to and including the age of 69 years. These changes were due to take effect from 1 January 2025.
While the increased upper age limit will remain in place, amendments introduced in the Finance Bill propose a clawback period of 12 years in relation to disposals of qualifying assets in excess of €10m made by an individual between the ages of 55 years and 69 years (inclusive) from 1 January 2025. The relief will operate to defer any CGT which would be due by the parent disposing of the asset to the earlier of (i) the date on which the shares are disposed of by the child or (ii) the expiration of 12 years from the date of the disposal.
Where a qualifying asset on which retirement relief is claimed is subsequently disposed of by the child within 12 years of the transfer, the child will be assessed on the deferred CGT in addition to any CGT arising in respect of the gain accruing to the child. However, if the qualifying asset is held by the child for at least 12 years, the CGT will be abated. This change is to be welcomed and will ensure that transfers of successful businesses to the next generation are not penalised subject to a number of requirements being satisfied.
Angel investor CGT relief
Angel investor CGT relief was introduced in Finance (No. 2) Act 2023. The relief provides a reduced CGT rate for qualifying investments made by a qualifying investor in a
qualifying company. The reduced CGT rate is 16% for direct investments or 18% for investments made by a partnership. The relief was restricted to a lifetime limit of €3m on gains. The Finance Bill increased the lifetime limit on gains from €3 million to €10 million. The commencement of the relief is subject to Ministerial Order.
Capital acquisitions tax thresholds
There were no changes to the rate of capital acquisitions tax (CAT), which remains at 33%. However, the tax-free thresholds for gift and inheritance tax have increased as follows:
Group A (including gifts/inheritances to a child or minor child of a deceased child): increased from €335,000 to €400,000;
Group B (including gifts/inheritances to a sibling, niece, nephew or grandchild): increased from €32,500 to €40,000;
Group C (gifts/inheritances to a stranger-in-blood and relationships not falling within Group A or Group B): increased from €16,250 to €20,000.
These changes came into effect on 2 October 2024.
Small benefit exemption
Finance Bill 2024 confirms the increase in the small benefit exemption threshold to €1,500 per annum. There is also a very welcome increase in respect of the number of vouchers or benefits that qualify from the relief, with five gifts or vouchers now being eligible for relief providing the cumulative value does not exceed €1,500 per annum. This is a very welcome change and provides significant additional flexibility for employers to reward their workforce. Surprisingly, the Bill also states that the exemption will cease with effect from the year of assessment 2030 onwards.
Company car BIK measures
Finance Act 2019 previously introduced a new C02-based regime for company-provided vehicles, which took effect on 1 January 2023. During 2023, as a result of a significant number of employees experiencing increases in their income tax liabilities as a result of these changes, the Minister introduced a relief of €10,000 to be applied to the open market value (OMV) of cars in Category A–D (and all vans) in order to reduce the amount of BIK payable.
In a welcome move for the electric vehicle sector, the current reduction of €45,000 in OMV will continue to apply for electric vehicles until 31 December 2025. Additionally, the lower mileage limit in the highest mileage band will remain at 48,001 until 31 December 2025.
An exemption from BIK will apply from 1 January 2025, subject to certain conditions, where an employer provides a facility for the charging of a company-provided electric vehicle at the qualifying residence of a director or an employee. Importantly the employer must retain ownership of the charging facility for the relief to apply.
Personal tax thresholds, exemptions and credits
Finance Bill 2024 includes the increase of €2,000 to the standard rate cut-off point as announced in Budget 2025. This results in a tax saving of €400 for a single individual with income of €44,000 or more.
The personal tax credit, employee tax credit and earned income tax credit will each be increased by €125 to €2,000 for 2025. The home carer credit is also increased by €150 to €1,950 and the single person child carer tax credit has also been increased by €150 to €1,900 from 2025. In addition, the incapacitated child tax credit has been increased by €300 to €3,800 from 2025. Finally, the blind tax credit has also been increased by €300 to €1,950.
There was a small increase in the 2% threshold for USC from €25,760 to €27,382 which will ensure those on the minimum wage do not have some of their income fall into the next USC band. There was also a 1% reduction in the second USC rate band, with the rate applied on income between €27,382 and €70,044 now being 3%.
PAYE statute of limitations
There is a provision to amend the time limits within which the Revenue Commissioners can raise PAYE assessments against employers for tax years 2025 et seq. However, there are some uncertainties in relation to the effect of the changes and further clarity will need to be provided once the draft provision is debated.
Property-related reliefs
The help-to-buy scheme has been extended to the end of 2029. The scheme has also been expanded to include properties purchased through the Local Authority Affordable Purchase (LAAP) scheme.
An extension to the mortgage interest relief for 2024 has also been implemented. The relief applies to mortgage-holders with an outstanding mortgage balance of between €80,000 and €500,000 as of 31 December 2022. The relief will be available as a credit at the standard rate of income tax on the increase in mortgage interest paid in 2024 in comparison to 2022. The maximum value of any tax credit will remain at €1,250 per property.
An increase in the rental credit by €250 to €1,000 for individual renters, or to €2,000 for jointly assessed couples has also been included for the tax years 2024 and 2025.
In addition to renters, small landlords will also benefit. Rental income of €4,000 (up from €3,000 in 2024) will be disregarded at the standard rate of income tax in the tax year 2025 (with increases to €5,000 for 2026 and €6,000 for 2027). Importantly, a claw-back of the full relief will arise if, within four years, the landlord removes any of the rental properties from the rental market.
The deduction for pre-letting expenses incurred on a property that has been vacant for six months or more is extended to the end of 2027. The expenditure must be incurred within the 12-month period before the property is let as a residential premises. A cap on allowable expenses of €10,000 per property applies. The relief is subject to clawback if the property is withdrawn from the rental market within four years.
The Vacant Homes Tax (VHT) rate for chargeable periods from 1 November 2024 onwards has been increased to seven times the base Local Property Tax (LPT) liability for each liable property.
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