The 10 Major Measures in the Finance Act
The government presented its 2025 budget bill on Thursday, October 10, during a Cabinet meeting. To reduce the public deficit, which is projected to reach 6.1% in 2024, the Ministry of Finance has developed a series of measures aimed at restoring public finances. Here are the key measures that will affect your budget.
The government's goal is to reduce the deficit to 5% of GDP next year. To achieve this, 60 billion euros will be saved, with two-thirds of this amount coming from cuts in public spending. The remaining third will be financed by one-time, temporary tax contributions targeted at businesses and households capable of participating in this solidarity effort, as Laurent Saint-Martin explained in his introductory speech.
"One-time, temporary, and targeted tax contributions from businesses and households capable of contributing to this effort of solidarity"
The Minister of Budget and Public Accounts emphasized a “golden rule”: every euro of additional revenue must be matched by two euros in budget savings. Here are the main measures that will affect your wallet.
Special tax on the wealthiest 0.3%
As part of the effort-sharing initiative, the 65,000 wealthiest households (less than 0.3% of taxable households) will be subject to a special contribution. This measure applies to households subject to the exceptional high-income tax (CEHR), that is, those with a taxable income of more than 500,000 euros per year for a couple and 250,000 euros for a single person. The goal is to ensure a minimum tax rate of 20% for these households. The estimated revenue from this measure is 2 billion euros.
No freeze on the income tax schedule
Good news for individuals: the income tax schedule will not be frozen. It will be adjusted upward by 2%, thereby preventing a tax increase for the entire taxable population. The goal is to offset the effects of inflation on household tax burdens. Here is the new tax schedule:
2025 Income Tax Brackets for 2024 — 2% Indexation
Income bracket per tax unit Applicable rate for the bracket
Up to €11,520: 0%
From €11,520 to €29,373: 11%
From €29,373 to €83,988: 30%
From €83,988 to €180,648: 41%
Over €180,648: 45%
Retirement pension adjustments delayed by six months
The adjustment to retirement pensions will take place in July 2025, rather than in January. The government justifies this delay by citing the exceptional adjustments made in recent years, including an adjustment of more than 5% this year, even though inflation is expected to be around 2%. The estimated savings amount to 3.6 billion euros.
Social benefits will increase in April 2025
Social benefits (Disability Allowance for Adults, Activity Bonus, RSA) and minimum old-age benefits will be adjusted on April 1, 2025, to account for inflation. Unlike basic retirement pensions, there will be no delay in this adjustment.
Electricity: Regulated Rates Drop, but a Tax Rises
The regulated electricity rate (TRV) will decrease by 9% effective February 1, 2025. However, the excise tax on electricity—also known as the TICFE or CSPE—will increase. Households with market-based electricity plans will therefore see their bills rise in 2025. The estimated revenue from this measure is 3 billion euros.
Energy Check: Changes in 2025
The process for awarding the energy voucher will change in 2025. This assistance, ranging from 48 to 277 euros, is intended for low-income households. The government will now use the household’s electricity delivery point (PDL), in addition to the reference taxable income, to determine which households are eligible. Previous recipients will continue to receive the energy voucher automatically if they still meet the income requirements, but those newly eligible will need to file an application.
End of the reduced VAT rate for gas boilers
The 2025 budget bill eliminates the reduced VAT rate for gas-fired boilers, which will increase from 5.5% or 10% to 20%. This measure is in line with a European directive on the energy performance of buildings, adopted in April 2024. The estimated revenue is 200 million euros.
Extension of the Zero-Interest Loan Program
To make it easier to become a homeowner, the zero-interest loan will be extended nationwide for first-time homebuyers, under conditions to be specified at a later date. Currently, the zero-interest loan is available for the purchase of new homes in high-demand areas or for existing homes requiring major energy-efficiency renovations.
Elimination of a Tax Break for Furnished Rentals
Landlords of short-term furnished rentals—whether listed directly or on platforms such as Airbnb or Abritel—enjoy tax benefits. One of these benefits, applicable upon the resale of the property in question, will be eliminated in 2025. The government plans to eliminate the tax break for landlords operating under the LMNP status, who will still be able to deduct depreciation from their rental income but will no longer be able to reduce the taxable capital gain upon resale. The estimated revenue is 200 million euros.
Stricter Penalties for Internal-Combustion-Engine Vehicles
The threshold for the CO2 penalty on the most polluting internal-combustion vehicles will be lowered. As of January 2024, this threshold is 118 g of CO2 per km, corresponding to a tax of 50 euros. It will be lowered by 5 g of CO2 per km in 2025, then by 7 g of CO2 per km in 2026 and 2027. For the highest-emitting vehicles, the maximum rate of this tax will be increased by 10,000 euros per year through 2027. The threshold for the weight-based penalty will also be lowered, from 1,600 kg to 1,500 kg starting in 2026. The estimated revenue is 300 million euros.
