BUDGET 2025: Income tax rate reduced, threshold raised

In a move designed to enhance disposable income and encourage economic growth, Finance Minister Dr. Ashni Singh announced a series of adjustments to the personal income tax regime in his 2025 budget presentation.

The measures are set to benefit workers, parents, and individuals with multiple income streams, all while incentivising productivity and hard work.

One of the most notable changes for 2025 is the increase in the income tax threshold. Dr. Singh revealed that, from the 2025 tax year onwards, the threshold will rise to $130,000 per month.

Those workers who will no longer pay income taxes are those who earn $130,000 or less. What this also means is that individuals will only pay tax on the amounts earned after the first $130,000 is deducted.

This represents a substantial increase from the previous threshold of $100,000, which was raised from $85,000 in 2024.
This measure is anticipated to result in $8.5 billion more in disposable income for workers across the country, offering relief to many who may have been feeling the strain of previous tax obligations.

In a further step to boost disposable income, the Finance Minister also announced a reduction in the personal income tax rate. The tax rate for employed and self-employed individuals will decrease from 28% to 25%. This reduction, estimated to benefit over 100,000 taxpayers, will put an additional $3.6 billion back into the pockets of working individuals.

In a bid to reward hard work, new tax adjustments will also apply to overtime and second jobs.

Starting in 2025, the first $50,000 earned from overtime work each month will be non-taxable. This change aims to ensure that workers are fairly compensated for their extra efforts. It is expected that this will cost the government over $600 million annually.

Similarly, individuals with second jobs will benefit from a tax exemption on the first $50,000 of income earned from those additional sources of employment.

To further support families, the budget also includes provisions for parents. A new measure will allow parents to claim $10,000 per child each month as non-taxable income.

This adjustment is designed to increase the disposable income of parents, giving them more financial flexibility to manage household expenses.

It is projected that the cost of this measure will exceed $1 billion annually, directly benefitting families across the nation.
The changes to personal income tax, when combined with other measures such as the removal of excise tax on fuel and the adjustment to electricity tariffs, are expected to inject over $90 billion into the economy.