Budget 2025 - ‘A Bike Shed Budget?’ How to do even better...

Budget 2025 is the biggest spending splurge in our history.That’s hardly surprising with an election coming up and tens of billions in extra tax pouring into State coffers.

But despite all of this free-flowing dosh, and perhaps because of it, Budget 2025 was not as generous as it seems or could have been,  by the time it gets into our pockets.

While there’s definitely ‘something for everyone’,  inflation and an ever-growing array of stealth taxes will claw back much of our gains.

The Government is throwing money at us solve a cost-of-living crisis it has partly fuelled.

It was a bit of a ‘bike shed budget’: hugely expensive yet not providing as much shelter as you’d expect for the price involved!

Yet by taking our financial fate into our own hands, you can save even more money than what was on offer this week.

Here’s the real story of Budget 2025 and some savvy tips on making the most of it.

Energy

The €2.2bn splurge to ease the cost-of-living crisis seems massive. But, it’s not as quite as impactful as it looks when you look into what’s driving up our energy bills this winter!

Electricity users will get €250 - half this year and the rest in early 2025.

Yet nearly three-fifths of this is already being clawed back by just two levies on our bills that are really stealth taxes imposed by Government to sneakily make us pay for what arguably it should be funding directly.

The Government has decided to impose a Public Service Obligation (PSO) levy to pay for the State’s renewable energy plan – and it’s already starting to add €42.50-a-yea to our electricity bills from October.

Another €100 will be slapped on annually to pay for investments to our energy network. Carbon taxes will also see our fuel costs go up when we top up our petrol tanks. And although heating fuels such as gas were spared until May, these will still kick in.

Effectively, these are stealth taxes, part of a plethora of levies and costs that are everywhere placed on business and passed onto us.

What they are giving with one hand here, they are taking with the other.

The rest of the cost of living package will boost several types of welfare payees with an array of bonus payments. 

Double welfare payments, including pensions in October and December, will be welcomed.

So too will the extension of the fuel allowance to Under 66s with a lump sum of €300 for recipients of this valuable payment.

How to beat the Budget: Make over three times the Government’s energy credit by switching energy provider. Sometimes even just threatening to do so will get you a substantially better deal.

Bonkers.ie says it can save you €812 on your gas and energy bills on average.  Or check out low-cost provider Yuno, which is promising to save users of both gas and electricity €914 compared to the average (see elsewhere).

Also make sure to claim the fuel allowance if entitled, not only for the benefits outlined above but also because it leads to a lot of add-on goodies such as valuable grants for insulating your home.

Tax

This year’s Budget  tax package was, as usual, a big pile of Meh!

The total of €1.4bn in minor adjustments to credits, bands and allowances barely keep pace with inflation, never mind the burgeoning wage increases that are pushing people into ever-higher tax bands.

The €1.4bn package is ‘budget’ neutral, according to both the ESRI think tank and the Fiscal Advisory Council, who are ones who should know.

This means basically that it doesn’t cost the State anything – or conversely give us anything.

How to beat the Budget:

Make your own tax bonanza by claiming all the reliefs and credits you’re entitled to – going back up to four years.

Tax credits and allowances often go unclaimed, benefiting revenue and not the taxpayer. The average tax refund through Taxback.com is €1,880. 

Unclaimed credits include medical expense relief, rent tax credit, remote working relief, marriage relief, third level tuition fees relief, and flat rate expenses. 

Inheritance tax

Inheritance tax cuts were meant to be a major feature of Budget 2025.

Yet, just like the above, it was a lot of fuss about nothing over the long term.

Inheritance tax thresholds haven’t gone up since 2011 – since when property prices have absolutely rocketed.

So increasing something that should be index linked (to inflation) but isn’t every 14 years is not doing us a favour.

The inheritance tax threshold for gifts and inheritances from parents to children will belatedly rise from €335,000 to €400,000.

In effect, this makes up  just a little bit for the massive erosion in real terms of these thresholds.

How to beat the Budget:

Draw up a will and seek advice on making the most of inheritance tax limits to distribute your estate tax-efficiently. This will potentially save far more money than the Budget change.

Pensions

Contributory pensions went up by €12 a week, which is really worth about €6 after inflation. Still, at least it’s going in the right direction. The new contributory pension will be €289 per week.

How to beat the Budget:

Even after the Budget increase, €289 a week is still a miserable sum to look forward to living on if you’re one of around 800,000 adults who don’t have a private pension.

If you do have one, bump it up through additional voluntary contributions to make the most of handsome tax relief.

If not, get a pension now. You’ll have to join one anyway from next September through a new auto enrolment scheme, the Budget confirmed this week.

Mortgage interest credit

This is a much underused credit now potentially worth thousands.

Yet few people bother to claim it - simply because there’s a tiny bit of effort involved.

You could already get relief of 20% on the increase in interest paid on a mortgage from the end of 2022 to the end 2023, capped at €1,250.

Last year, the average amount to be claimed was nearly €800.

Those on trackers or with lenders who hiked rates dramatically will benefit most. But people on average variable or fixed rates could still gain hundreds of euros.

On Tuesday, the Government extended the Mortgage Interest Tax Credit to the 2024 tax year, so now there’s two years you can claim for.

It explained: “The qualifying criteria for this credit stays the same. But, the amount you get is based on the increased interest you pay on your mortgage in 2024 when compared with the amount you paid in 2022.”

How to beat the Budget: Don’t let this valuable credit go abegging as many people seem to be doing! Backdating claims to last year is no problem so you can benefit on the double by making a claim now if you haven’t done so already.