We are now three weeks after Budget 2025 and the Finance Bill which gives effect to the budget measures (and a lot more detail about how they will work) has been published and will be passed in the next few weeks, with some potential amendments. We’ve highlighted a couple below.
Tax changes
These have already been covered but just a reminder – for a couple, each earning €50,000 gross and renting a property, they will be €2,382 better off in 2025 than in 2024 with no pay increase. There is an opportunity to not take this but instead put it into a pension, which is still going to give 40% tax relief – so if each person put €3,970 into a pension, they would have the same amount of take home pay (ignoring any potential pay increase) but would have contributed nearly €8,000 into their pensions. Well worth considering if funds allow.
Electric cars
This is still one of the best tax savings out there for an employer or employee. Buy a new electric car (say a Tesla Model 3 for example which now costs €40,984 brand new after adding back the grant), through your company. The company can pay the full repayments on it, as well as the tax insurance, electricity and tyres, and you don’t pay any BIK tax as it is below the threshold of €45,000 for the rest of 2024 and 2025. Compare this to funding a car of the same value personally, you would have to earn €85,383 gross to achieve the same net amount as well as paying the costs yourself, easily another €10,000 gross. The company gets an immediate corporation tax writeoff of €3,000. Also a charger can be installed with no BIK from January 2025.
Pensions
The main unanticipated announcement was to pensions, specifically PRSAs. For the last two years, companies have been able to put as much money as they wanted to into director or employee PRSAs since the benefit in kind cap was lifted, provided even a small/token salary was paid, the amount that could be paid into that individual’s PRSI was potentially unlimited. However since the Finance Bill was published, it added a restriction to the level of contributions, matching it to a maximum of 100% of salary. Currently it appears that this will take effect from 1 Jan 2025, meaning that there is a short window of opportunity to contribute a large one off amount into a PRSA before the end of the year. Consider it for in particular the spouse of a company director who is receiving a small salary and has no pension, or for directors who stopped paying into pensions some years ago to keep the company alive and are underfunded now.
Autoenrolment
Also on pensions, auto enrolment for your business is coming on 30th September 2025. This means that your company will have to contribute as per the table below. Note that the employer % is based on all salary, including bonus, commission etc, which is not how normal pension contributions work.
While this is very positive it is almost always a better option to set up a group scheme for your employees as you can control the amount that is contributed, and the employee also receives tax relief. Talk to your pensions broker now and get something ready for 2025.
Small gift exemption
Tax free, you as a company owner, can gift yourself a voucher of €1,500 from January 2025, either One4All, prepaid Mastercard, Dunnes/Tesco. This is worth over €3,000 of salary. Just do it. You can even give it to your employees.
Be careful though as
a) any smaller gifts e.g. birthday present for employees count towards the €1,500 limit
b) you can only have two of these gifts in 2024 – increasing to 5 in 2025
c) the limit is €1,000 in 2024, which is still very generous
d) you must tell Revenue on or before the date you pay the benefit under the ERR (Enhanced Reporting Requirements) which also applies to all travel and subsistence payments and working from home benefit.
Life cover and business continuation/keyman cover
Life cover is very inexpensive in Ireland. If you take it out when you are in your 30s with no underlying conditions it could cost you as little as €14.85 per month (cover of €250k for 20 years for a 30 year old male). It is so important to have cover in place to protect your family if something should go wrong. Please go and see your financial broker to talk through your options.
Lastly a quote from Warren Buffett, the famous billionaire “sage of Omaha” who has made billions of dollars through his fund Berkshire Hathaway. He is well known for living modestly, even taking Bill Gates out for a meal in McDonalds and using coupons to pay. His advice is “Do not save what is left after spending, but spend what is left after saving”. Very good advice – set up a regular savings debit from your account to be taken just after your salary lands, you will be amazed at how easy it is to save.
Ben Lewis – Lewis & Co Chartered Accountants
