Below please find an overview of the Budget 2025 just presented this evening.

(A) Macroeconomic Overview

Malta’s real GDP growth is expected to be 4.9% for 2024 and 4.3% for 2025, with domestic demand remaining the main contributor to economic growth in 2025. Inflation is projected to be 2.5% in 2024 and to ease to 2.1% in 2025. The Cost of Living Adjustment (COLA) for 2025 will be set at €5.24 per week.

Tax Compliance

Emphasis on tax compliance has resulted in the collection of €300 million in tax arrears and the conclusion of 1,200 new tax payment agreements. The percentage of timely filed tax forms increased to 93% in 2024 from 73% in 2023.

Budget Deficits

Government anticipates running significant annual budget deficits of around €850 million in 2025, and approximately €700 million per year in 2026 and 2027. It forecasts achieving a 3% deficit-to-GDP ratio by 2026, with Malta’s GDP expected to grow from €22 billion in 2024 to over €25 billion in 2026. Public debt is projected to reach €13.4 billion by 2027, maintaining around a 50% public debt-to-GDP ratio due to the forecasted economic growth.

(B) New Income Tax Rates

Below are the income tax rates and brackets for 2024 and the changes for 2025. By a way of an example, using the average wage of €23,000, income tax for a person opting for the single rate will go down from €3,025 to €2,350 for a reduction of €675 :-

The usual tax refund of €60 to €140 per year for anyone earning less than €60,000 will remain effective.

(C) Occupational Pensions

Every employee will need to be offered by his or her employee the option to join a an occupational private pension plan. The employee can choose not to opt for just private pension plan. The employer has no obligation to contribute towards their employees’ pension plan. Government will contribute up to a maximum of €100 per month for each of its public employees for their private pension plans. The present tax incentives for both employer and employee for such occupational private pension plans remain as they were.  

(D) Public Pensions

Public pensions will increase by €8 per week in 2025.

All those born from 1976 onwards will now need 42 year of NI contributions (instead of 41 years) to be eligible for a state pension.

As per previous years a further 20% has been added to now hit 80% of having no tax paid on state pension, in the case of pensioners that remain working post pensionable age.

Widow’s pension to rise by €3 each week, benefiting 7,500 widowers across the country. National insurance exemptions for service pensions to rise by €200, now reaching €3,666, benefiting 3,250 service pensioners. Bonuses for people who didn’t pay enough national insurance contributions throughout their lifetime, some 16,000 people, mostly married women, will rise to €1,000 for people with nine years of contributions. Allowance for people aged between 75 and 79 who live at home to increase by €50 to reach €350. Those over the age of 80 will again receive €450.

(E) Children Allowance

Children Allowance is being increased by a further €250 in 2025, on top of the €250 increase given in 2024. This will cost a further €16.5million annually.

Allowances for parents that have or adopt children, will now cover the 3^rd child at €1,500 for this 3^rd child.

(F) Supplementary Assistance

The budget includes various measures, including an increase in the supplementary allowance for low-income individuals and increased assistance for those unable to work due to illness. These include:-

• €48m worth of COLA Plus payments to be given to 100,000 households, each receiving between €100 and €1,500 each year
• Marriage allowance to rise by €170 to reach €500 each person (or €1,000 for a couple)
• People undergoing IVF treatment to benefit from 100 hours of paid leave for each treatment cycle (60 hours for the prospective mother and 40 hours for their partner). This will also apply to self-employed women, starting from next year.
• Foster parents to get an additional €10 per week, rising to €6,240 yearly for each child fostered.
• Tax credit increase of €250 for parents whose children attend specialised therapy.
• Assistance for those with severe disabilities will increase by €7.42 per week, and the allowance for children with disabilities will increase by €5 per week to €35 per week.

(G) Education

Families that send their children to private schools, can now decrease their taxable income by higher amounts, set at €3,500 for those in kindergarten, €4,600 for those in primary schooling and €6,500 for those in secondary schooling.All children in primary, middle and secondary schools will be given a €20 book voucher to be spent at the 2025 Malta Book Festival.

(H) Health

A new tender will soon be issued with regards the extension of the Emergency Department and the creation of a centre of Acute Psychiatry. €14million will be allocated so that waiting list for certain medical interventions will be reduced.

Government will finance a 6 month gym membership for youths born in 2005, 2006 and 2007.

€4.5m will put towards programmes bringing mental health services close to the homes of those in need and sessions through video calls. Women’s sanitary products to be made tax-free, together with medical accessories used by female cancer patients.

(I) Economy – Way forward

Besides the economic vision 2050 document, budget establishes that negotiations with the EU commission are still ongoing with regards international taxation and grants & credits that can be given as part of 15% tax system.

(J) Clean Transport

Government grants for electric vehicles will vary from €2,000 for electric motors to a maximum of €8,000 for electric vehicles and small vans. The benefit for scrapped cars will be of €1,000 with an additional €1,000 for Gozitans. Sliema and Cospicua to get underground parking near ferry landings.

Existing grants for photovoltaic panels, battery storage and solar water heaters, among others, to remain in place. Work on offshore wind turbines and second interconnector to continue.

(K) Social Dialogue

To strengthen social dialogue, Government will be setting up an agency that will be covering public consultation and research for social partners. A new CEO will also be employed for MCESD.