Budget 2017

12 October 2018

Budget 2017

Budget 2017
11 October 2016

This year’s Budget was well documented in advance as being one for this Government to give back to the people in terms of tax reductions and to implement a positive capital expenditure plan. The referendum result in the UK with regard to ‘Brexit’ has hindered this budget somewhat, but overall it is following with the Government’s plan to stabilise the tax base and increase expenditure on capital projects.

On the taxation side, it is a relatively quiet budget with the main aim of the budget attempting to address area’s such as housing, homelessness, education and health. This Budget has been apportioned approximately 2:1 between public expenditure and taxation benefits.

It was announced that the Government will set aside a ‘rainy day fund’ and provide up to €1bn per year to this fund for the Government of the day to use once the budget is in surplus in 2018.

For the second year in a row the only tax increase announced in the budget was the increasing of a packet of 20 cigarettes by 50c.

This summary will focus primarily on the Taxation measures presented by Minister Noonan with a brief outline of the Public Expenditure measures announced by Minister Donohoe.

The main features of Budget 2017 as they will affect you in business and in your personal life are as follows;

  • USC rates change from 1% to 0.5%, 3.5% to 2.5% and 5.5% to 5%. No change in 8% rate on incomes over €70,044
  • Entry point to 5% USC rate raised from €18,668 to €18,772
  • No change to the 12.5% Corporation tax rate
  • The 3-year tax relief for start-up companies is being extended for another 2 years
  • Flat rate addition rate for unregistered farmers to increase from 5.2% to 5.4%
  • Income averaging ‘step out’ in year of low income
  • Earned Income credit up €400 to €950 for self-employed
  • Home Carer tax credit increased to €1,100 from €1,000
  • Capital Acquisitions Tax Group A tax free threshold increased from €280,000 to €310,000. Group B & C thresholds increased by 8%
  • There is to be no change in the VAT rates, which includes the keeping of the 9% rate for the tourism / hospitality sector
  • Tax free income from ‘Rent a room relief scheme’ to be increased to €14,000 per annum
  • ‘Help to buy’ scheme announced for first time buyers
  • Tax on sugar, sweets and drinks to be introduced in line with UK in April 2018
  • Price of 20 cigarettes to increase by 50c from 12 October 2016
  • ‘Home Renovation Tax Inventive Scheme’ is being extended to 31 December 2018
  • Farm succession plan to be extended to 2019
  • No increase in excise duty on alcohol
  • No increase in excise duty on petrol or diesel
  • CGT relief for entrepreneurs’ rate reduced from 20% to 10%
  • No changes in CGT or CAT rates (other than the entrepreneur rate above)
  • Pension tax relief to remain at the marginal rate of tax
  • 85% social welfare Christmas bonus in 2016
  • All Social Welfare (including State pensions) to increase by €5 per week from March 2017
  • Childcare schemes to be introduced from September 2017

Income Tax & Levies

There have been no changes to the rates or thresholds of income tax.

The 3 lower rates of USC have all been reduced by 0.5% each. The entry level to the 5% rate of USC has been increased to €18,772 in order to take full-time workers on the minimum wage out of the top rate of USC.

The Earned Income Credit has been increased by €400 to €950. This credit is available to taxpayers earning self-employed trading or professional income and to business owners / managers who are ineligible for a PAYE credit on their salary income.

The deduction available for qualifying interest payments on loans used to purchase, improve or repair residential property is being increased from 75% to 80%. It was indicated that this will increase by 5% each year until it has been restored to 100%.

The Home Carer Credit is being increased by €100 from €1,000 to €1,100.

The tax free exemption threshold for ‘Rent a room relief’ is being increased from €12,000 to €14,000 per annum.

The Foreign Earnings Deduction (FED) is being extended to 31 December 2020 with the minimum amount of days required to qualify reduced to 30 days from 40 days.


The 9% rate applicable to certain service industries (tourism / hospitality etc) will continue in 2017. The minister did however state that the need for such a rate was less important today than it was when it was introduced. I would therefore expect this to change in the coming years. The fall in the value of Sterling is the main reason that I suspect that it has remained in this budget.

The flat rate addition for un-registered farmers is being increased from 5.2% to 5.4%.

No further changes to VAT.

Home Renovation Incentive (HRI)

This scheme which provides a tax credit to homeowners who carry out renovation and improvement works on their principal private residences and rental properties will be extended until 31 December 2018. The tax credit is calculated at 13.5% of qualifying expenditure over €5k to a maximum of €30k. Therefore, a credit will be available of between €675 to €4,050.

Help to Buy Scheme

This scheme will provide for a rebate of income tax to assist first time buyers fund the deposit required under the Central Bank rules in order to purchase a newly built home (built from 19 July 2016) up to 31 December 2019.

The rebate will consist of an income tax refund over the previous 4 years of up to 5% of the purchase price of the home up to €400,000 in value. The rebate will be due for properties valued up to €600,000 also, but the maximum rebate capped at up to 5% of €400,000 (i.e. €20,000).

Capital Gains Tax (CGT)

No changes were announced with regard to CGT rates.

The revised CGT relief for entrepreneurs introduced from 01 January 2016 will see a reduced rate of tax from 20% to 10% apply to the disposal in whole or in part of a business up to an overall limit of €1m in chargeable gains.

Capital Acquisitions Tax (CAT)

No changes were announced with regard to CAT rates.

The Group A (primarily from parents to their children) threshold will increase from €280,000 to €310,000 with effect from 12 October 2016.

The Group B & C thresholds will increase by 8% to €32,500 and €16,250 respectively.

Corporation Tax

The Government has stated its commitment to maintaining the 12.5% Corporation Tax rate.

The 3-year tax exemption on start-up companies will be extended for a further 2 years.

Agri tax measures

The flat rate addition for un-registered farmers is being increased from 5.2% to 5.4% with effect from 01 January 2017.

Accelerated capital allowances for energy efficient equipment is being introduced to sole traders and non-corporates.

Introduction of an Income Averaging ‘step out’. This will allow a farmer to opt out of the Income Averaging scheme in a year that it has unexpectedly poor income so that they receive a cash benefit in that year instead of tax liabilities being kept high due to the averaging of previous higher profits. This can be availed of for the 2016 tax year.

Stamp Duty

No changes to Stamp Duty were announced in the Budget.

Deposit Interest Retention Tax (DIRT)

The rate of DIRT has been reduced by 2% to 39%. This rate will continue to decrease by 2% per annum until the rate reaches 33%.

Customs & Excise

Excise duty on a packet of 20 cigarettes is being increased by 50c with effect from 12 October 2016.

There will be no change on Excise duty on alcohol, petrol or diesel.


Tax relief at the marginal rate is to remain on pension contributions.

Brief outline on the Public Expenditure measures

  • Social Welfare payments – All pensions to increase by €5 per week from 01 March 2017
  • Social Welfare bonus – 85% Christmas bonus will be paid to social welfare recipients in 2016

Single Affordable Childcare Scheme – Subsidy scheme to be introduced from September 2017

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