The Key Highlights from Budget 2016 (Ireland)

Income Tax

• No changes to Income Tax Rates or Bands.

• The changes to the Universal Social Charge (USC) are as follows:

• The entry point to the Universal Social Charge (USC) will be increased to €13,000 meaning incomes of €13,000 or less are exempt from USC.

• The 1.5% USC rate will be reduced to 1%.

• The 3.5% USC rate will be reduced to 3%.

• The 7% USC rate will be reduced to 5.5%.

• Therefore the revised rates and bands for the USC are as follows:

• - From €0 to €12,012 at 1%

• - From €12,013 to €18,668 at 3%

• - From €18,669 to €70,044 at 5.5%

• - From €70,045 to €100,000 at 8%

• PAYE income in excess of €100,000 will be at 8%.

• Self Employed Income in excess of €100,000 will continue at 11%.

• Medical card holders and individuals aged 70 or over whose income does not exceed €60,000 will pay a maximum rate of 3%.

• The marginal rate of income tax will be reduced to 49.5% for individuals earning under €70,044.

• An Earned Income Tax Credit of €550 will be introduced for self-employed individuals with trading or professional income and business owner/managers ineligible for the PAYE credit.

• There will be an increase of €190 in the Home Carers Tax Credit to €1000 per annum and an increase in the income threshold to €7,200 per annum. This will benefit single income married couples with children and those individuals who care for elderly or incapacitated individuals.

• The Home Renovation Initiative (HRI) will be extended until the 31st December 2016.

• Introduction of a tapered PRSI credit for employees up to €624 per annum.

• An increase of €20 per week in the weekly threshold from €356.01 to €376.01 per week where liability to employers PRSI increases from 8.5% to 10.75% on all earnings.

• An income tax credit worth up to €5,000 per annum for five years for family, farming partnerships to facilitate the transfer of family farms to the next generation.

• The Extension of general and young farmers’ stock relief for a further three years.

• Profits or gains from the occupation of woodlands are being removed from the high earners restriction.

Corporation Tax

• The introduction of a Knowledge Development Box to provide for a 6.25% corporation tax rate on profits arising to certain patents and copyright software which are of a result of qualifying R&D activity that is carried out in Ireland.

• The 3 year corporation tax relief (on trading income and certain capital gains) for Start Up Companies is being extended to new business start ups commencing to trade over the next three years.

• The Pension Fund Levy of 0.15% will end this year.

• The Bank Levy will be extended until 2021.

Value Added Tax (VAT)

• The 9% Vat rate on tourism related activities is being retained. There are no other changes to VAT rates.

Capital Taxes

• The Group A tax-free threshold for Capital Acquisitions Tax will be increased from €225,000 to €280,000. This typically applies to transfers between parents and their children.

Excise Duties

• The price of 20 cigarettes will increase by 50 cents from midnight on 14th October 2015.

• No change to Alcohol, Petrol, Diesel, Motor Tax or to Vehicle Registration Tax (VRT).

• The special relief reducing the standard rate of Alcohol Products Tax by 50%on beer produced in microbreweries will be available upfront as well as through a rebate.

• The road tax for large goods vehicles (LGV’s) will be simplified and reduced, with rates from €92 to €900 from January 2016.

Other

• The Statutory Minimum Wage will be increased by 50 cent from €8.65 per hour to €9.15 per hour.

• The review of the Local Property Tax (LPT) will be postponed until 2019, meaning homeowners will not be faced with increased liability in 2017 as a result of increasing property values.

• The cap on qualifying expenditure for Film Relief to be increased to €70 million.

• Christmas Bonus to all welfare recipients increased to 75%.

• An Increase in the Child Benefit allowance by €5 per Child, to €140 per month, from January 2016.

• Children will now be eligible for free childcare from three years of age, up until they are five and a half, or until they start primary school.

• All pension payments to increase by €3 per week from January 2016.

• An increase of €2.50 in the fuel allowance to €22.50 per week.

• An increase in the Family Income Supplement (FIS) by €5 per week for one child and by €10 per week in respect of two children.

• Free GP care will be extended to all children aged 11 and under, however this is announced with the caveat that it is subject to successful negotiation with GP’s.

• There will be no increase in hospital fees or prescription charges in 2016 and the threshold for the Drugs Payment Scheme, for medical cards and GP visit cards will remain unchanged.

• Statutory Paternity Leave of two weeks to be introduced from September 2016.

• The existing stamp duty on Debit/ATM cards will be replaced by a 12 cent charge per ATM transaction, subject to a cap of €2.50/€5 per annum depending on card type.

• NAMA to deliver 20,000 residential units by 2020, 90% of which will be in Dublin and 75% will be houses/starter homes.

• The Employment & Investment Incentive (EII) and the Start-Up Relief for Entrepreneurs (SURE) are being amended to comply with state aid rules. In addition, expansion works to existing nursing homes will qualify for the EII and the changes announced to the EII in Budget 2015 are being commenced from midnight tonight.

I hope you find this briefing useful and please feel free to share this email. If you have any questions, do feel free to contact me.

Timothy Kelliher Chartered Accountant