Budget 2025: Income Tax Threshold moves to $130k; PAYE, tax on over-time reduced

The Government has proposed the increase of the income tax threshold to $130,000 in the 2025 National Budget. This means that employees’ income will only be taxed beyond that sum.

Minister with responsibility for Finance, Dr. Ashni Singh during his budget presentation today (Friday, January 17, 2025) noted that this will result in over $8.5B taxpayers being removed from paying taxes.

The income tax threshold has steadily increased over the past four years. In 2022, the threshold was raised from $65,000 to $75,000 and this was increased to $85,000 in 2023 and further to $100,000 in 2024.

“I now wish to announce an increase of the threshold to $130,000 monthly, with effect from year of income 2025. This represents a doubling of the threshold from the time we entered office. This will result in an additional $8.5 billion in disposable income for workers and the removal of 22,000 persons from the tax net.”

PAYE reduction

Meanwhile, the Government has also announced the reduction of the Pay As You Earn (PAYE) tax thus increasing disposable income in the hands of workers.

“I also wish to announce a reduction in the Personal Income Tax rate of 28 per cent to 25 per cent for employed and for self-employed workers. This measure will increase the disposable income of more than 100,000 taxpayers and is estimated to put $3.6 billion back into the hands of these taxpayers.”

Reduction of tax on overtime

In addition, Dr. Singh has announced that the first $50,000 earned as overtime pay will not be taxed.

“Mr Speaker, for those persons who earn overtime for work beyond their normal working hours, the first $50,000 monthly of their overtime would be non-taxable. This measure ensures workers are rewarded for their productivity and effort.”

Additionally, the first $50,000 from a second job will be non-taxable.

The 2025 Budget debates will commence shortly. Following the passage of the budget, the measures announced will take effect.