12 October 2018
|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;
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.
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.
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
Single Affordable Childcare Scheme – Subsidy scheme to be introduced from September 2017