The Key Highlights from Budget 2017 (Ireland)
“The Government cuts taxes, increases spending in its €1.3 billion Budget. Resources are divided between increased investment in public services and tax cuts in a proportion of 2 to 1 in favour of public services.”
Income Tax
No changes to Income Tax Rates or Bands.
The changes to the Universal Social Charge (USC) are as follows:
The 1% USC rate will be reduced to 0.5%.
The 3% USC rate will be reduced to 2.5%.
The 5.5% USC rate will be reduced to 5.0%.
The ceiling on the reduced 2.5% rate will increase from €18,668 to €18,772 ensuring a worker on the minimum wage will remain outside from the top rates of USC.
Therefore, the revised rates and bands for the USC are as follows:
From €0 to €12,012 at 0.5%
From €12,013 to €18,772 at 2.5%
From €18,773 to €70,044 at 5.0%
From €70,045 to €100,000 at 8%
The Home Carers’ Tax Credit will be increased by €100 to €1,100.
The Earned Income Tax Credit for Self Employed will be increased by €400 to €950.
The Home Renovation Initiative (HRI) will be extended by two years until the 31st December 2018.
Full Loan Interest Deductibility on rental income will be restored over five years – from 75% to 80% in 2017 then by 5% each year over the next four years.
The ceiling for the Rent a Room Scheme will be increased to €14,000 per year.
The Living City Initiative has been reviewed to include landlords and removes the cap on floor space.
The Special Assignee Relief and the Foreign Earnings Deduction are both extended until 2020. The number of days required to be spent abroad for the Foreign Earnings Deduction is being reduced from 40 to 30 days to help small business identify and trade overseas.
The Start Your Own Business Relief is being extended for a further two years.
A Help to Buy Scheme for First Time Buyers will be introduced. It will provide a rebate of income tax paid over the previous four years to a maximum of 5% of the purchase price of a new home up to the value of €400,000 to First Time Buyers of new homes only. Pro rata rates will apply to lower priced houses and a full rebate calculated on €400,000 will apply to houses between €400,000 & €600,000. There will be no rebate on houses over €600,000. This scheme will apply to newly built houses only from the 19th July 2016 until 2019.
DIRT will be reduced by 2% in 2017 and by 2% each year until 2020 (from 41% to 33%).
Mortgage Interest Relief extended to 2020.
Corporation Tax
The main Corporation Tax will be unchanged at 12.5%.
Changes are planned to Section 110 (TCA 1997) to eliminate the use of it by so called “vulture funds” to reduce their tax bills.
A new SME focused Share Based Remuneration Scheme will be introduced in 2018.
It is planned to introduce a tax on sugar sweetened drinks in April 2018 in line with the UK after public consultation.
Value Added Tax (VAT)
The 9% Vat rate on tourism related activities is retained.
There are no other changes to VAT rates.
Capital Taxes
The Group A tax-free threshold for Capital Acquisitions Tax will be increased by €30,000 from €280,000 to €310,000. This typically applies to transfers between parents and their children.
The Group B & C tax free thresholds for Capital Acquisitions Tax will increase by 8%.
Entrepreneurial Relief will be improved by reducing the Capital Gains Tax rate of 20% to 10% on disposals of qualifying assets up to a limit of €1 million in chargeable gains.
Excise Duties
The price of 20 cigarettes will increase by 50 cents.
No change to Alcohol, Petrol, Diesel, Motor Tax or to Vehicle Registration Tax (VRT) rates.
VRT relief for hybrid vehicles will be extended by two years.
VRT relief for electric vehicles will be extended by five years.
Farmers
An Income Tax Credit for Fisherman of €1270 per year will be introduced, which will shelter income up to €6,350 (the value of the Seafarers exemption).
The Farm Restructuring Relief Scheme will be extended until 2019.
Farmers facing exceptional poor income years will be allowed to step out of income averaging and pay tax for one year only with subsequent liabilities deferred.
Flat Rate addition for farmers not Vat registered will increase from 5.2% to 5.4%.
There will be a new Animal Welfare Scheme for Sheep introduced.
There will be a new low cost, below 3%, highly flexible loan fund introduced for farmers.
The Scheme of Accelerated Capital Allowances for Investment in Energy Efficient Equipment will be extended to Sole Traders and allowances will be available in the first year.
Other
The State Pension will increase by €5 per week from March 2017.
All weekly social welfare payments (including carers’ allowance, disability allowance, job benefit and job seekers allowance) will increase by €5 per week from March 2017.
The Christmas Bonus to all social welfare recipients will be increased to 85% in 2016.
Job Seekers between 18 and 24 will get increase of €2.70 to €102.70 per week.
Medical Card extended to all Children in receipt of a Domiciliary Care Allowance.
The €25 cap on the prescription charge for Over 70’s is to be reduced to €20 from March 2017.
A Single Affordable Childcare Scheme will be introduced from September 2017 for all Children from 6 months to 15 years. There will be mean tested subsidies, based on parent’s income, for children aged 6 months to 15 years and universal subsidies for all children aged 6 months to 3 years.
National Gas used as Vehicle Fuel will be taxed at the EU Minimum Rate of excise for a period of 8 years
A new relief from carbon tax for solid fuels that include a biomass element to incentivise the development of greener fuels.
Combined Heat & Power Plants to benefit from Carbon tax reliefs.
Increase in Health spending of €497m in 2017.
About 4,500 front line staff (nurses, guards, teachers) to be recruited.
€1.2 billion in funding for housing with 47,000 social housing units by 2021.
An additional €105 million to enable 15,000 households to avail of the Housing Assistance Payment Scheme.
The Government intends to establish a “rainy day” fund of up to €1 billion annually once budget is in surplus in 2018.
I hope you find this information useful. If you have any questions, do feel free to contact me.
Timothy Kelliher
Chartered Accountant
