New tax year: What businesses need to know and do in 2025
As the new tax year begins, employers and owners of small businesses can learn about key changes and initiatives taking effect in 2025.

As the new tax year begins, owners of small and medium businesses will be looking at their financial well-being, reviewing costs and preparing for any changes in 2025.
Budget 2025 allocated €1.03bn to the Department of Enterprise, Trade and Employment, with some of the measures due to come into effect from 1 January 2025, while others will begin later in the year.
This article outlines the changes and supports relevant to your business and aims to guide you through the measures taking effect in the new tax year.
Here’s what we cover:
- Key dates for businesses to know about
- Minimum Wage increase
- Taxation changes
- Small Benefit Exemption Scheme increase
- Statutory Sick Pay scheme increase
- VAT registration thresholds increase
- Tax incentives and reliefs for specific sectors
- Angel investors CGT Relief
- Research and Development (R&D) Tax Credit increase
- New audio-visual tax credit and extension of film credit
- Retirement Relief age limit increase
- Benefit-in-kind relief on electric vehicles
- Pension auto-enrolment scheme
- Final thoughts on the new tax year
Key dates for businesses to know about
- 1 January 2025: Minimum wage increase
- 1 January 2025: All changes to Universal Social Charge (USC), tax bands, etc
- 30 September 2025: Pension auto-enrolment rollout
- To be announced: Statutory Sick Pay, currently at 5 days, to increase to 7 days in 2025. However, the government is reviewing whether increases in 2025 and 2026 will happen.
Minimum Wage increase
From 1 January 2025, the National Minimum Wage increased by 80 cents to €13.50 per hour.
If you haven’t already updated your payroll software to reflect the wage increase, now is the time to take action.
Note that the minimum wage rate is the basic rate and does not include overtime premiums, bonuses and other irregular earnings.
The above increase is for workers age 20 and older, younger workers get a pro-rata increase as follows:
- Age 19: €12.15
- Age 18: €10.80
- Under 18: €9.45
Commenting on the increase, Caroline Reidy, managing director of The HR Suite, an HR consultancy with offices in Dublin and Kerry, says many employees earning the minimum wage are in the service industry, mainly the hospitality and retail sectors.
Caroline adds: “Roster management is something that business owners will have to manage very closely, and potentially changing opening hours to match quieter and busier times.”
To prepare for the increase, Caroline advises employers to “reconsider your cost base, and ultimately your prices based on what is quite a significant increase onto your payroll costs”.
Taxation changes
Budget 2025 introduced some tax measures that came into effect on 1 January 2025 aimed at easing the rising living costs for workers.
Adjustments to tax bands and rates were to align with the increase in the minimum wage to ensure these workers are not paying more tax or Universal Social Charge (USC) and to ensure earnings under €20,000 are outside of the income tax net.
The Minister for Finance, Jack Chambers, confirmed in his press release that the standard income tax band has been increased by €2,000 and the personal, employee and earned income tax credits will increase by €125 to €2,000.
In addition, the USC rates and thresholds were amended from 1 January 2025. For total income below €13,000, the exemption remains so that taxpayers pay no USC. For earnings above this de minimis threshold, the charge is payable on each band of earnings as follows:
Rate | Income band |
0.5% | Up to €12,012 |
2% | From €12,012.01 to €27,382 |
3% | From €27,382.01 to €70,044 |
8% | €70,044.01 and over |
11% | Self-employed income over €100,000 |
Another change that will result in higher payroll costs is the increase in Pay Related Social Insurance (PRSI) employer contributions rates by 0.1% from 1 October 2024 and planned further increase of 0.1% increase in 1 October 2025.
The starting Class A lower rate increased to 8.9% in 2024 and increases to 8.9% in 2025.
Please see the Irish Revenue page for details of all PRSI classes and the applicable rates for each class.
Employers or their accountants should ensure they have updated their payroll software to reflect these changes, check that PRSI and other contributions are reported accurately in their payroll submissions to Revenue, and maintain accurate records of all payroll and taxation charges.
Small Benefit Exemption Scheme increase
The Small Benefit Exemption Scheme, which allows employers to give a tax-free bonus to their employees, has been increased.
Starting from 1 January 2025, employers can give their employees up to €1,500 (increased from €1,000) and this can be split into up to 5 payments during the year.
Note: the reward cannot be given in the form of cash — but can be a tangible gift, gift card or voucher, gym membership, concert tickets or similar.
Statutory Sick Pay scheme increase
The Statutory Sick Pay scheme commenced on 1 January in 2023 — giving employees 3 days’ paid sick leave — set at 70% of daily earnings and capped at €110 per day. The entitlement was increased to 5 days from 1 January 2024.
However, the government has not yet approved proposed further increases for 2025 and 2026, and it is currently reviewing ESRI research on the financial impact of statutory sick leave on businesses before deciding on any further increases for 2025 and 2026.
You should keep an eye on the latest announcements from the Department of Enterprise, Trade and Employment to find out when this will happen.
VAT registration thresholds increase
Increases in the thresholds for businesses obliged to pay Value Added Tax (VAT) on goods and services will provide some welcome relief for small business owners by helping to avoid administration costs of charging VAT and submitting returns.
VAT registration thresholds increased to €85,000 for goods and €42,500 for services from 1 January 2025.
The latest list of thresholds can be viewed on the VAT registration website maintained by the Irish Revenue.
Tax incentives and reliefs for specific sectors
Budget 2025 included tax incentives and reliefs to encourage investment in innovative startups, support research and development and boost the film and audio-visual sectors.
Angel investors CGT Relief
Angel investors in innovative startups can avail of a Capital Gains Tax relief of 16%.
This new incentive allows an investor who makes a qualifying investment to get relief when they sell shares in the company.
The limit of relief on gains has been increased from €3m to €10m.
Research and Development (R&D) Tax Credit increase
Under this measure, SMEs engaging in research and development can claim back up to 25% of their R&D costs for three years.
This increased for accounting periods commencing on or after 1 January 2024 to 30%.
The limit on how much they can claim in the first year has also increased to €75,000, from €50,000. To qualify for the credit, research must be in the field of science or technology.
New audio-visual tax credit and extension of film credit
Producers of reality shows, docuseries, lifestyle, talk and game shows will gain a significant boost this year with a new tax credit for the audio-visual sector introduced in Budget 2025.
The new credit for unscripted production provides a 20% tax credit on eligible expenditure on 80% of the total production costs capped at €15m.
Film producers will also benefit in 2025 from a 40% credit on qualifying expenditure of up to €20m.
The new ‘uplift’ is a continuation of Section 481.
Applicants for either of the productions will be required to meet a set of cultural criteria to qualify for the support. As both measures are subject to European Commission approval, they are expected to come into effect later in 2025.
Retirement Relief age limit increase
Family owned businesses could avail of a change to Capital Gains Tax reliefs.
From 1 January 2025, business owners aged between 55 and 69 can hand over their business up to the value of €10m to their son or daughter exempt of CGT.
From age 70 onwards, the exemption threshold is reduced to €3m.
Any CGT on transfers above these limits will be deferred until the asset is disposed of, and if the child retains the transfer asset for over 12 years then no CGT will need to be paid.
Benefit-in-kind relief on electric vehicles
If you provide electric company cars for your employees, they will benefit from the previously legislated tax reliefs on benefit-in-kind charges: €35,000 relief on the original market value of the car, plus an extension benefit of the €10,000 of universal relief introduced in 2023, making a total of €45,000 BIK relief in 2025.
A further BIK exemption is available for the installation of home chargers provided by employers to support employees or directors driving electric vehicles.
Pension auto-enrolment scheme
A significant milestone for employers this year is the rollout of the pension auto-enrolment scheme.
Caroline of The HR Suite says businesses should be already preparing for the scheme due to start rollout on 30 September 2025.
Caroline says: “It’s one of the things in the first quarter of this year, businesses need to be starting to think about because it is one of those very high costs and administrative scenarios that businesses are going to have to navigate in 2025.”
During this initial phase of mandation, employees aged between 23 and 60, earning €20,000 or more and who are not part of a pension scheme will be automatically enrolled in the new pension scheme.
Future expansion of the scheme is expected.
Additionally, employees who previously contributed to a pension who meet the other conditions will be automatically enrolled. Employees who do not meet the criteria can also opt into the scheme.
An independent body — the National Automatic Enrolment Retirement Savings Authority (NAERSA) — will administer the scheme and an employer portal will be available using your Revenue Online Services (ROS) credentials.
Contributions will be phased in over 10 years, with employee and employer payments beginning at 1.5% and increasing every 3 years by 1.5% until they reach 6%.
The State will also contribute 33% of employee contributions.
While the new body, NAERSA, will cover administration of the scheme, businesses will need to look at payroll, employee contracts and financial projections to ensure the transition runs smoothly on 30 September.
Employees will have questions and possibly concerns about the scheme, so make sure communication lines are open and you have all the relevant information to hand.
Final thoughts on the new tax year
This year looks to be a challenging one for small business owners in terms of the number of changes and financial planning required.
Along with the usual annual taxation, USC and PRSI changes, your business may also be impacted by the increase in the minimum wage and pension auto-enrolment later in 2025.
Consult with your payroll provider, business adviser and/or accountant to ensure all the relevant updates are completed on time and your business is prepared for any measures coming into effect during the year.
With some financial planning and preparation, you can ensure you meet your business goals and continue to grow in 2025.
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