Employment Tax

Ireland | Finance Bill 2025

Summary

The Irish government published Finance Bill 2025 which contains the draft legislative provisions giving effect to the measures announced on Budget Day (7 October 2025). The Finance Bill also provides additional details in relation to the “simplification of the administrative process” in relation to SARP which the Minister mentioned on Budget Day. We welcome the extension of the SARP certification period from 90 to 180 days, however it is disappointing that the relief is restricted to 4 years in such circumstances.

The detail

Key tax measures impacting both employers and employees

Special Assignee Relief Programme (SARP)

SARP is a tax relief which provides an income tax reduction for certain employees who are assigned or transfer to Ireland. As announced on Budget Day, the relief is being extended for a further 5 tax years, to 31 December 2030.

For individuals arriving in Ireland in any of the tax years 2026 to 2030, it is proposed that the qualifying conditions are updated as follows:

• The employee’s ‘relevant income’ (base salary) in the year of arrival must exceed an annualised equivalent of €125,000.
• The threshold of the annualised employment income which is used in the calculation of the relief is increased to €125,000.
• The definition of ‘relevant employee’ is expanded to include individuals whose employer completes the SARP certification after 90 days but within 180 days from the date of the employee’s arrival in Ireland.
• Where the certification is made after 90 days but within 180 days from the employee’s arrival in Ireland, SARP will only be available for 4 consecutive tax years, commencing from the tax year after which the relevant employee is first entitled to the relief.

All other qualifying conditions remain unchanged.

The Finance Bill also proposes a change to the deadline for submission of the annual Employer SARP Return to 30 June after the end of the relevant tax year, for the 2025 tax year onwards.

Foreign Earnings Deduction (FED)

FED is a relief which provides an income tax deduction for employees who temporarily work abroad in “relevant states”. As announced on Budget Day, this relief is also extended for 5 years, to 31 December 2030. The Finance Bill also proposes the following changes to FED:

• The definition of ‘qualifying day’ is updated to remove the requirement that 3 consecutive days must be spent working in a relevant country.
• The definition of ‘qualifying day’ is also updated to provide that relief will only be available where the time working in a relevant country is “reasonably required” for the purposes of the performance of employment duties.
• The definition of ‘relevant state’ is updated to include the Philippines and Turkey.
• The maximum amount of employment income that may qualify for Income Tax relief is increased from €35,000 to €50,000.

Pension Auto Enrollment

The Pension Automatic Enrolment (AE) Retirement Savings Scheme is due to commence on 1 January 2026. The bulk of the provisions for the tax treatment of the scheme were included in Finance Act 2024, however Finance Act 2025 includes some new provisions. The key features of these provisions include:

• employer contributions to AE will be exempt from tax
• income and gains of AE funds while held by an AE provider will be exempt from tax
• amounts paid from the fund (after any tax-free lump sum) will be taxed

Finance Bill 2025 also deals with the tax treatment of AE retirement savings on the death of the participant, as well as ensuring that the exemption in respect of AE provider schemes extends to all relevant fund structures.

Other measures outlined on Budget Day

The Finance Bill also contains provisions to give effect to the changes below, which were announced on Budget Day

Company car benefit-in-kind (BIK) 

• The temporary universal relief applied to the original market value of cars in categories A-D and vans is being extended on a tapered basis for 3 further tax years, ending on 31 December 2028.
• The relief will remain at €10,000 for 2026, reducing to €5,000 for 2027 and €2,500 for 2028.
• The lower limit in the highest mileage band is being permanently reduced from 52,001km to 48,001km from 1 January 2026.
• A new vehicle category of A1 is introduced for zero emission company cars. Such cars will be subject to BIK at the following rates, depending on the level of annual business mileage:
  • 0 – 26,000km: 15%
  • 26,001 to 39,000: 12%
  • 39,001 to 48,000: 9%
  • 48,001+: 6%

Universal Social Charge

The Finance Bill provides for an increase in the 2% rate band ceiling of €1,318 to €28,700 to take account of the increase in the National Minimum Wage hourly rate that will apply from 1 January 2026. It also provides for an extension of the USC concession for full medical card holders for a further two years, so that full medical card holders whose income does not exceed €60,000 per annum will continue to pay a maximum USC rate of 2% until 31 December 2027.

Rent Tax Credit

The Finance Bill provides for the extension of the credit in its current form for a further three years to 31 December 2028, at a maximum value of €1,000 for a single individual and €2,000 for a jointly assessed couple.

Mortgage Interest Relief

The Finance Bill extends Mortgage Interest Tax Relief on a tapered basis to the 2025 and 2026 tax years, as follows:

• For 2025, the relief will be calculated based on the increase in interest paid in 2025 compared with interest paid in 2022, with maximum relief of €1,250.
• For 2026, the relief will be calculated based on 50% of the increase in interest paid in 2026 compared with interest paid in 2022, with maximum relief of €625.

All other conditions in relation to the relief remain unchanged.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Keith Connaughton
Partner

Aoife Reid
Partner

Clara Flynn
Director

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