State set to extend reduced Vat rate for energy bills in Budget 2025

Government ministers are continuing to thrash out details ahead of October’s budget, with senior sources saying it is the intention to retain the Vat rate at 9%.

Households will avoid a further hike in winter energy bills, as the Government is set to extend the reduced rate of Vat for gas and electricity in the upcoming budget.

Government ministers are continuing to thrash out details ahead of October’s budget, with senior sources saying it is the intention to retain the Vat rate at 9%.

Ministers have said the 9% retention is “likely to happen” as part of efforts to deal with the increased cost of living.

Other demands from coalition ministers are being laid out at present, including calls for an increase to the ceiling for the rent-a-room scheme.

The current maximum rent that can be earned tax-free through the scheme is €14,000.

However, Patrick O’Donovan, the  higher education minister, wants the ceiling to be raised further to encourage more people to accommodate students by offering 'digs' accommodation.

Mr O’Donovan also wants further increases to the renter tax credit beyond its current €750 limit.

Education Minister Norma Foley is pushing for further funds for the updated school transport scheme, which was announced earlier this year for the 2025/2026 school year.

Eligibility for school transport scheme

The updated scheme will change the distance from which a student must live from school to be eligible for a school bus.

The distance for primary school pupils will fall to 2km, with a further drop to 1km. 

For secondary school pupils, it will go to 2km, but not for urban areas with bus routes.

The costs of the scheme have been rising year-on-year, particularly for the special transport grant.

“There will be an ask to cope with the demand,” the source said, highlighting that extra pupils are availing of the bus options.

Agriculture Minister Charlie McConalogue is said to be pushing for extra funding for tillage farmers, seeking around €37m to give farmers €100 payments per hectare of land farmed.

Meanwhile, on Sunday Taoiseach Simon Harris set out his plans to use the sale of AIB shares to fund the construction of additional housing.

Speaking at the annual Béal na Bláth commemoration, Mr Harris said that there needed to be solidarity between generations.

“The proceeds from the sale of shares in the banks that the people of Ireland rescued should be directed toward developing housing,” he said.

The generation most affected by the mismanagement of banks deserves to benefit from our proper management.

“I think it’s only fair we explore using the proceeds from the sale of bank shares to help fund the construction of new homes.”

The Taoiseach also expanded on his proposals for a Department of Infrastructure, saying that it would help “shape the neighbourhoods, towns and villages” where people live and work.

In particular, he said that future governments must invest in infrastructure with the “same sort of entrepreneurial zeal that the first government applied to the Shannon scheme for electrification almost 100 years ago”.