Reaction to Budget 2025: Impact on Irish small businesses

Recent pre-budget announcements and the measures introduced in Budget 2025 establish a comprehensive support framework for small businesses.

This pro-business budget reflects the government's commitment to fostering growth, innovation and resilience amidst ongoing economic challenges. By introducing new grants, increasing funding for key agencies and implementing tax reliefs, Budget 2025 aims to protect economic wellbeing and directly benefits small and medium enterprises (SMEs).

Key impacts on small businesses

€170 million Power Up Grant

A significant highlight is the new €170 million Power Up Grant, providing a flat €4,000 to commercially rateable premises in the retail and hospitality sectors.

Recognising the increased energy costs, especially electricity, this grant will benefit approximately 39,000 businesses, offering much-needed financial support to sectors heavily impacted by rising operational costs.

National Minimum Wage increase

The National Minimum Wage will increase by 80 cents to €13.50 per hour from 1 January 2025. While aiming to improve living standards for low-paid workers, this presents challenges for small businesses in labour-intensive sectors.

Businesses will need to focus on operational efficiency to mitigate rising wage costs but may benefit indirectly from boosted consumer spending.

Additional funding to Enterprise Ireland

Enterprise Ireland will receive an additional €9.7 million in 2025. This supports a new five-year Seed and Venture Capital Scheme with a total fund of €250 million for innovative Irish start-ups.

The agency will also aid the decarbonisation of Ireland's industrial emitters, ensuring indigenous enterprises access targeted sustainability supports.

Investment in regulatory bodies

Increased funding for regulatory bodies ensures a well-regulated marketplace with high standards in employment rights, consumer protection and corporate governance.

For small businesses, this means a more stable operating environment, though it may require adherence to stricter compliance standards.

Business support programmes

• LEO Digital for Business Programme: Expanded to companies with up to 50 employees, offering three days of tailored support to adopt digital technologies — crucial for competitiveness in a digital market

• Lean for Business Programme: Provides subsidised support to improve operations, identify inefficiencies and reduce costs — essential in a high-wage environment

• Energy Efficiency Scheme Grant: Increased from €5,000 to €10,000, covering 75% of qualifying expenses, encouraging energy-saving measures and sustainability

• Trading Online Voucher: Continues to aid businesses in enhancing their online presence and e-commerce capabilities

Tax relief and business support

• Small benefit exemption: Increased from €1,000 to €1,500, allowing businesses to reward employees with tax-free benefits, aiding staff retention

• VAT registration thresholds: Raised from €80,000 to €85,000 for goods and from €40,000 to €42,500 for services, reducing administrative burdens

• Support for start-ups: Extension of the Employment Investment Incentive, Start-Up Relief for Entrepreneurs and Start-Up Capital Incentive until 2026. Investment relief under the Employment Investment Incentive doubles to €1 million and Start-Up Relief increases to €980,000

• Capital gains tax relief: Lifetime limit on gains increased from €3 million to €10 million, encouraging investment in innovative start-ups

Infrastructure investments

• €3 billion investment in electricity grids, water and housing, creating a more reliable operating environment — critical for long-term sustainability

• Funding for public services and climate initiatives: Opportunities for small businesses in construction, green technology and services

Labour costs

While the minimum wage increase poses challenges, reductions in income tax and USC rates may boost consumer spending, benefiting small businesses.

Companies need to enhance operational efficiency and innovation to manage rising wage costs.

Digital and green economy

• Digital adoption: Increased support helps small businesses embrace technology, improving efficiency and competitiveness

• Sustainability initiatives: Grants for energy efficiency and decarbonisation encourage sustainable practices, reducing energy costs

Innovation and growth support

• R&D tax credit: Increased from €50,000 to €75,000 in the first year, improving cash flow for businesses investing in innovation

• Training and upskilling: National programmes support access to a skilled workforce, meeting demands in key sectors

Summary

Budget 2025 demonstrates a strategic commitment to helping small businesses thrive. The €170 million Power Up Grant, support for digital adoption, enhanced energy efficiency grants and continued online optimisation funding improve business performance. Combined with infrastructure investments and tax reliefs, these measures create a supportive environment for SMEs to grow, innovate and manage operational costs.

However, rising labour costs and inflation pressures require businesses to prioritise efficiency and innovation. Embracing digital solutions and sustainable practices will enhance resilience and competitiveness in a high-wage, labour-constrained economy.

Conclusion

The pro-business Budget 2025 aims to protect Ireland's economic wellbeing by substantially supporting small businesses. Through targeted grants, tax reliefs and increased agency funding, the government commits to fostering a vibrant SME sector.

We encourage small businesses to leverage these opportunities to enhance operations, invest in innovation and contribute to a sustainable, prosperous economy.

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