A quick review of the Irish 2018 Budget and the changes that will affect your income and tax.
- Corporation tax rate of 12.5% to remain
- An 80% cap on the amount of capital allowances, and related interest, that can be claimed each year against related income is to be reintroduced for intangible assets acquired from midnight tonight. The stated aim is to ensure some smoothing of corporation tax revenues over time. Any excess allowances/interest can be carried forward to future years so the change will not give rise to a reduction in the overall relief available. There should be no impact for IP acquired on or before 10 October 2017.
- A share-based remuneration incentive called the Key Employee Engagement Programme or “KEEP” is being introduced to facilitate the use of share-based remuneration by unquoted SME companies to attract key employees. Gains arising to employees on the exercise of KEEP share options will be liable to Capital Gains Tax on disposal of the shares, in place of the current liability to income tax, USC and PRSI on exercise. This incentive will be available for qualifying share options granted after 1 January 2018 and the full conditions will be set out in the Finance Bill.
- There was no mention of any expansion of Entrepreneurs Relief for capital gains tax so the existing limit of €1 million that is subject to the 10% tax rate would appear set to continue in place for 2018.
Capital Gains Tax/Capital Acquisitions Tax
- Reduction in seven-year period for property owners to enjoy full relief from Capital Gains Tax to four years.
- There were no changes announced to the CAT exempt thresholds.
- Home carer tax credit increased by €100 to €1,200 p.a. The home carers income threshold is €7,200.
- Earned income tax credit to be increased by €200 to €1,150 for the self-employed and proprietary directors
- The higher 40 per cent cut off rate for income tax will rise by €750 from €33,800 to €34,550 (married person with one income up to €43,550
- Electric vehicles – 0% rate of BIK in 2018 for one year to allow for comprehensive review ahead of next budget
Universal Social Charge
- Rates of USC reduced as follows: No change to 0.5% rate – Applies on income up to 12,012 2.5% rate is reduced to 2% – Applies on income between €12,012 – €19,372 5% rate is reduced to 4.75% – Applies income between €19,372 – €70,044 No change to the 8% rate- Applies income above €70,044
- Duty on a packet of 20 cigarettes will be increased by 50 cent from midnight tonight with a pro rata increase on other tobacco products.
- A tax on sugar-sweetened drinks will be introduced in April 2018 to coincide with similar measures in the UK. There will be a 30 cent per litre charge on all drinks with over 8 grams of sugar per 100 ml. Reduced rate of 20 cent per litre on drinks with between 5g and 8g of sugar per 100ml
- The Minister confirmed the reduced 9% rate for the tourism and hospitality sector will be retained. There will be no changes to the reduced VAT rate of 13.5% or the standard VAT rate of 23% in 2018.
- Mortgage interest relief will be cut next year in a move that will affect about 300,000 homeowners. The relief for people with loans from 2004-2012 is being continued to 2020 but at just 75% the rate in 2018, 50% in 2019 and 25% in 2020.
- Stamp duty on commercial property to increase from 2% to 6% from midnight tonight
- Vacant site levy increases from 3% to 7% in the second and subsequent years as the Government seeks to tackle socalled ‘land hoarding’. The increased rate would first apply from 1 January 2019.
- A new deduction of up to €5,000 per property for pre-letting expenses of a revenue nature will be introduced for owners of residential property that has been vacant for a period of 12 months or more. A clawback will arise if the property is withdrawn from the rental market within 4 years. The relief will be available for qualifying expenses incurred up to the end of 2021.
- A total of €1.83 billion has been allocated to housing in Budget 2018, with 3,800 new social houses to be built by local authorities and approved housing bodies.
- The Housing Assistance Payment Scheme will increase by €149m. Funding for homeless services will increase by €18m to more than €116m.
- 4,000 extra social housing units to be delivered next year.
- 800 new Gardai and 500 civilians to the force will be recruited.
- 1,000 extra Special Needs Assistances in Irish schools -up to 15,000
- The statutory minimum wage is to rise from €9.25 to €9.55 per hour from January 2018.
Medical and Social Welfare/Other Measures
- All social welfare payments and the old age pension will increase by €5 per week from March 2018
- Social welfare recipients will continue to be entitled to a Christmas bonus equal to 85% of their weekly payment
- New telephone support of €2.50 per week for those on the living alone and fuel allowance.
- Reduction in prescription charges for all medical card holders under 70 from €2.50 to €2 per item. The monthly cap drops from €25 to €20, with the threshold for the Drugs Payment Scheme dropping from €144 to €134.
- €20 million more for childcare measures including a further extension of two years free pre-school years.
We will be pleased to discuss any queries you may have regarding how the Budget 2017 affects you or your business.
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