Finance Act 2024: Key Changes for Payroll and Employers in Ireland

The Government has released the Finance Bill 2024, outlining key tax changes resulting from the 2025 Irish Budget, alongside other measures to take effect in the coming year. 

The Finance Act 2024 introduces a number of updates that will impact payroll processes and employer responsibilities in Ireland. First published on 10 October 2024, the Act was enacted on 12 November 2024 following several amendments. These changes, including tax adjustments and new transparency requirements, are essential for businesses to stay compliant and manage payroll effectively. Below, we break down the key elements and their implications for employers. 

This Act addresses changes to income tax, USC, relief for homeowners and renters, as well as sustainability measures. It also introduces new Benefit-in-Kind initiatives related to electric cars and renewable energy, in line with Ireland’s climate goals. 

These measures reflect the government’s strategy to use its budget surplus for sustainable economic growth, social support, and environmental sustainability, while preparing for future economic stability. 

The Finance Act 2024 includes several updates affecting payroll, taxation, and employee compensation. 

• Minimum Wage Increase: From 1 January 2025, the national minimum wage will rise by €0.80 per hour, from €12.70 to €13.50. This increase is designed to help low-income workers manage rising living costs and combat inflation. 

Employers must update payroll systems to reflect this change and ensure compliance, particularly for part-time or variable-contract workers. 

"A full-time worker on the minimum wage will see an annual net pay increase of approximately €1,424. Due to the cumulative increases in tax credits, a single person earning €20,000 or less in 2025 will be outside of the income tax net." — Minister Jack Chambers, Budget 2025 

Payroll systems will need to be updated to reflect these changes, ensuring accurate deductions and compliance. Specific tax credits such as the Home Carer Credit, Single Child Carer Credit, Incapacitated Child Credit, and Blind Person Credit must also be correctly applied to maximise tax relief for eligible employees. 

Pay Transparency: Ireland will implement the EU Pay Transparency Directive, which requires businesses to include salary ranges in job postings and prohibits questions about previous salaries. This is designed to address pay gaps and promote fair remuneration. Payroll teams will need to work closely with HR to ensure alignment with these new requirements. 

The Pay Transparency Directive is part of a broader European initiative to promote equal pay, increase wage transparency, and help close the gender pay gap. 

Related Blog:  Salary Transparency: The Key to Financial Well-being at Work

Beyond payroll, the Finance Act 2024 introduces important changes for businesses and the economy. 

• Participation Exemption for Foreign Dividends: This new exemption simplifies Ireland’s tax regime for multinational companies, enhancing its attractiveness as a global business hub. 
• Capital Gains Tax (CGT) Relief Enhancement: The lifetime cap on the reduced CGT rate has increased from €3 million to €10 million, offering greater incentives for investment in start-ups and small businesses. 
• Corporate Tax Exemption for Foreign Dividend Income: A new corporate tax exemption for qualifying foreign dividend income aligns Ireland’s tax policies with international standards, easing compliance for multinational companies

The Act also includes measures to incentivise investment in the green transition, including: 

• An extension of the accelerated capital allowances scheme for gas and hydrogen-powered vehicles and refuelling equipment. 
• A temporary €10,000 relief applicable to the Benefit-in-Kind (BIK) regime for electric company cars. 
• A BIK exemption for employers providing electric charging facilities at the residence of employees or directors. 

Electric Vehicle (EV) Benefits: The €10,000 BIK relief on the Original Market Value (OMV) of EVs is extended for another year. Employees will also benefit from reduced BIK rates for electric vehicles in 2025, with overall relief of €45,000, comprising both the €35,000 specific relief and an additional €10,000. 

Additionally, the 4,000 km reduction in the highest mileage band will be extended until 31 December 2025. A BIK exemption is introduced for costs incurred by employers installing charge points at the homes of employees or directors. 

See also: Free Benefit in Kind (BIK) Calculator 

These EV incentives significantly reduce the tax burden on employees with company cars. By lowering the taxable value of company-provided EVs, employees will see reduced monthly tax deductions, encouraging greener vehicle use and enhancing the financial appeal of company car schemes. 

These changes have significant implications for payroll professionals, HR teams, and business leaders. Employers must update payroll software to reflect new USC thresholds and tax bands. Additionally, compliance with pay transparency requirements will require collaboration between payroll and HR teams to ensure fair and equitable pay structures. 

For businesses with international operations, the tax reforms present opportunities for improved financial management and compliance. Companies must stay informed and seek expert guidance to maximise the benefits of the new policies. 

The Finance Act 2024 introduces key updates that will impact payroll, taxation, and business operations in Ireland. From minimum wage increases and pay transparency to corporate tax reforms and sustainability initiatives, these changes will shape how businesses manage their finances and workforce. Staying ahead of these developments ensures compliance and helps businesses take full advantage of the new legislation. Payroll professionals and business leaders should begin preparing now to implement these changes effectively in 2025. 

Stay ahead of the changes! Ensure your payroll software is ready for 2025 by updating your processes now. Chat to our team to see how our solutions can ensure you are ready.