The Key Points from Budget 2018 (Ireland)

October 10, 2017

 

A summary of the key points from Budget 2018 are as follows:

 

Income Tax

  • The entry point for the higher rate of income tax increased to €34,550 from €33,800.

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

  1. The 2.5% USC rate will be reduced to 2.0%.

  2. The 5.0% USC rate will be reduced to 4.75%.

  3. The ceiling on the reduced 2.0% rate will increase from €18,772 to €19,372.  This will ensure that full time workers on the increased national minimum wage of €9.55 do not pay the upper rate of USC.

  4. The entry point for the USC will remain unchanged at €13,000.

  5. Therefore, the revised rates and bands for the USC are as follows:

    1. From €0 to €12,012 at 0.5%

    2. From €12,013 to €19,372 at 2.0%

    3. From €19,373 to €70,044 at 4.75%

    4. From €70,045 to €100,000 at 8%

  • The Home Carers’ Tax Credit will be increased by €100 to €1,200.

  • The Earned Income Tax Credit for Self Employed will be increased by €200 to €1,150.

  • Mortgage Interest Relief on loans taken out between 2004 and 2012 will be tapered out by 2020 with the rate at 75% in 2018, 50% in 2019 and 25% in 2020.

  • No mention of the Help to Buy Scheme for First Time Buyers so can assume for the moment will be continued.

  • A working group is being established to plan the amalgamation of the USC and PRSI over the medium term.

 

Corporation Tax

  • The main Corporation Tax rate will be unchanged at 12.5%.

  • A Share based incentive scheme for SME’s will be introduced to support SME’s in their efforts to attract and retain key employees by providing for an advantageous tax treatment on share options.

  • A sugar tax of 30 cent per litre on drinks with over 8 grams of sugar per 100ml will be introduced in April 2018, same time as the UK.  A reduced rate of 20 cent per litre will apply to drinks with between 5 and 8 grams of sugar per 100ml.

  • Electric cars to have zero per cent rate of benefit in kind for one year alongside the existing VRT relief up to a maximum of €5,000 and the SEAI grant of up to €5,000 already in place.  There will be a comprehensive review of BIK on motor vehicles in time for the next budget.

  • A Brexit loan scheme of up to €300 million is being made available to SME’s, including food businesses to help with short term working capital needs.

  • The vacant site levy will be increased from 3% to 7% in 2019.  This means that any owner of a vacant site on the register who does not develop their land in 2018 will pay the 3% levy in 2019 and then become liable to the increased rate of 7% from 1 January 2019.  If the land owner continues to hoard land in 2019, they will pay 7% in 2020, resulting in an effective vacant site levy of 10% over the two years.

  • The tax write off available on expenditure on intangible assets (transfer of intellectual property) by a company will be reduced to 80% from midnight tonight.

  • The accelerated capital allowance scheme for energy efficient equipment will be extended for a further three years to the end of 2020.

 

Value Added Tax (VAT)

  • The 9% Vat rate on tourism related activities is retained. 

  • The Vat rate on sunbed services will be increased from 13.5% to 23% in line with the government’s cancer strategy.

  • There are no other changes to VAT rates.

 

Capital Taxes

 

  • There will be a reduction in the seven year holding period that owners must retain qualifying assets for to enjoy full relief from CGT to four years.

  • The leasing of agricultural land for solar panels is to be classified as a qualifying agricultural activity for the purposes of specific CAT & CGT reliefs.

 

Stamp Duty

 

  • The Stamp Duty rate on commercial property transactions will increase from 2% to 6% with effect from midnight tonight.

  • There will be a stamp duty refund of 4%, subject to certain conditions, introduced for purchasers of residential sites provided they start building houses within 30 months.

 

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.

 

Farmers

 

  • Stamp duty relief on intra family farm transfers kept at 1% for another three years.

 

Other

  • The State Pension will increase by €5 per week from the last week of March 2018.

  • All weekly social welfare payments (including carers’ allowance, disability allowance, job benefit and job seekers allowance) will also increase by €5 per week from the last week of March 2018.

  • The Christmas Bonus to all social welfare recipients will be retained at 85% in 2017.

  • There will be a €20 increase in the earnings disregard for the one parent family & jobseekers transitional scheme.

  • The threshold for the Family Income Supplement will increase by €10 per week for families with three children, with €2 per week rise in the rate of the qualified child’s payment.

  • There will be a new Telephone Support Allowance of €2.50 for those receiving the Living Alone & Fuel allowances.

  • Prescription charges for all medical card holders under 70 will be reduced from €2.50 to €2.00 per item, with the monthly cap reduced from €25.00 to €20.00. 

  • The threshold for the Drug Payment Scheme will be reduced from €144 to €134.

  • 1,300 extra teaching posts to be created in 2018.  This is to help achieve a reduction in the primary level pupil teaching ratio to 26:1.

  • The measures introduced in September 2017 for a Universal childcare payment for under 3’s will continue to be supported in 2018.

  • €1.83 billion allocated in funding for housing with 4,000 new social housing units to be built in 2018.

  • A new house building entity to boost construction has been announced.

  • An additional €149 million to enable 17,000 households to avail of the Housing Assistance Payment Scheme.

  • A rainy day fund of €1.5 billion will be established from the Ireland Strategic Investment Fund with an annual contribution of 500 million from 2019

 

 

 

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

 

Thanks,

 

Tim

 

Timothy Kelliher

Chartered Accountant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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