Welcome to a mid-year update on the Irish tax developments all SMEs should know about.
The first half of 2025 has seen myriad changes that could impact your business planning, cash flow, and compliance obligations. With that in mind, here’s what you, as an SME owner, should know.
Income Tax & USC – Impacts for SME Employers.
Budget 2025 introduced several changes that affect payroll and employee retention:
– The Standard Rate Band was increased by €2,000 to €44,000 for a single person, reducing income tax for many.
– Personal, Employee, and Earned Income Credits each rose to €2,000.
– The 4% USC rate dropped to 3%, meaning that individuals will pay a 3% USC rate on income up to €27,382.
These changes, which came into effect from 1 January 2025, may reduce payroll tax burdens and improve net pay for staff. Something to consider in a tight labour market.
Employer PRSI – Increase Coming in October.
More changes are coming from 1 October 2025, including a slight rate increase on employer PRSI:
– For employees earning over €527/week: rate rises from 11.15% to 11.25%
– For employees earning €527/week or less: rate rises from 8.9% to 9%
This change is part of the government’s broader effort to strengthen the Social Insurance Fund. Employers should factor this into Q4 payroll budgeting and consider communicating the change to affected staff.
Exchequer Tax Receipts – Strong H1, Cautious Outlook.
The Irish exchequer recorded €45.9 billion in tax revenues in the first half of 2025, up 10.5% year-on-year. Among the key drivers were Income Tax (+4.3%), VAT (+5.8%) and Corporation Tax (7.4%)
These figures reflect continued strength in employment and consumer spending. However, the government has cautioned that corporation tax remains volatile, with a small number of multinationals accounting for a large share of receipts. Public spending has also surged, with gross voted expenditure in H1 reaching €51 billion, up 8.2% on 2024. This already exceeds the Department of Finance’s full-year forecast, suggesting upward pressure on fiscal policy and potential implications for future tax planning.
Something to consider: The upcoming 15% global minimum tax (effective 2026) and changes to capital allowances may further influence receipts next year.
R&D Tax Credit – More Accessible for SMEs?
The Irish Tax Institute pre-Budget submission has proposed reforms to make the R&D tax credit more SME-friendly, including:
– Simplified documentation requirements
– Faster refunds for smaller claims
– Broader definitions of qualifying activities
If your business is innovating—even in process improvements or software—it is something to keep an eye on in Budget 2026.
KEEP, EII & Share Schemes – Incentives for Growth.
Several proposals currently exist to make equity-based incentives more viable for SMEs. These tools can help attract and retain key talent without immediate cash outlay. Consider the following:
– KEEP (Key Employee Engagement Programme): A tax incentive for SMEs to support the use of share options as a form of staff remuneration
– EII (Employment Investment Incentive): A tax relief which aims to encourage individuals to provide equity-based finance to trading companies.
– Share-Based Remuneration: Advocacy for deferring tax until realisation, easing cash flow concerns for employees and founders.
Residential Zoned Land Tax (RZLT).
If your business holds development land, be aware that over €40 million in liabilities were reported under RZLT by the May deadline this year. Ensure your land holdings are reviewed for exposure.
Capital Gains Tax – Planning Opportunities.
Considering either a sale or succession? Though CGT remains at 33%, SMEs may benefit from:
– Retirement Relief: For business owners aged 55+ planning succession
– Entrepreneur Relief: 10% CGT rate on qualifying disposals up to €1 million
– Holding Company Structures: For tax-efficient exits and reinvestment
Enhanced Reporting Requirements (ERR).
ERR obligations continue to evolve. While larger employers are the primary focus, SMEs should ensure:
– Payroll software is up to date
– Benefits and expenses are correctly categorised
– Penalties are avoided through timely and accurate reporting
Pensions – Tax-Efficient Planning for Owners.
There’s growing momentum to:
– Increase the Standard Fund Threshold (SFT)
– Remove age-related contribution limits
– Harmonise treatment across PRSAs, occupational pensions, and ARFs
These changes could offer more flexibility and tax efficiency for SME owners planning retirement.
Important Update for Irish Taxpayers & Agents.
Revenue has recently introduced a new agent linking process on ROS, requiring clients to digitally approve their tax agent via their own ROS or myAccount portal.
While this change enhances security and transparency, it’s also created some practical challenges:
- Clients without active ROS access are unable to approve links.
- Conflicts with existing ROS certificates are causing delays.
- Some agents are experiencing disruptions in filing obligations.
To avoid issues, we recommend:
- That you ensure you have active access to ROS or myAccount.
- That you monitor your ROS inbox for agent link requests.
- That you verify your ROS certificate is valid and accessible.
- Contact Revenue promptly if any issues arise.
What’s Next?
The Finance Bill 2025 is expected to address several SME-relevant issues, including extension of reliefs like SARP and FED, further ERR clarifications and potential changes to VAT thresholds and digital reporting.
The Budget 2026 is also due to be announced in October, with the Finance Bill following before the end of the year.
If you’d like to explore how these updates affect your business or if you’re planning a restructure or sale, let us do the hard work for you. Contact Fitzgerald Power’s Tax Team today on 051-870152 or visit www.fitzgeraldpower.ie for expert advice on future-proofing, sale preparation, succession planning, or just about anything else tax-related!
