In an otherwise crowd-pleasing budget, it may have gone unnoticed that €50 million was allocated for 1916 commemorations compared with just €17 million for emergency accommodation for homelessness crisis. Reasonable you think?
That aside, I will focus on the tax and business end of the Budget 2016 in this summary.
It must be noted that the full details will only be available in the Finance Act
INCOME TAX CHANGES
Universal Social Charge (USC)
Reducing Income Tax to below 50% (to 49.5%)
Basically the USC was reduced by 1.5%. The entry point is increased to €13,000.
- The 1.5% rate of USC down 1.0%
- The 3.5% rate of USC down to 3.0%, threshold increased to €18,668
- The 7% rate of USC will be reduced to 5.5%, threshold – €70,044
People earning over €70,000 will benefit but will not get a reduction on tax on earnings over €70,000
- A Self Employed tax credit of €550 for self-employed earners in lieu of the PAYE tax credit of €1,650 which they are not entitled to. This is an attempt to close the difference in credits allowed for employees versus self-employed.
- Home Carers credit up €190 to €1,000 per year.
- Up to €5,000 tax credit for farmers – to assist with succession of farms for family partnerships for five years.
A ‘Tapered PRSI credit’ up to €624 per annum for employees so it appears that self-employed will not get such benefit
OTHER TAX CHANGES
Capital Acquisitions Tax (Inheritances / Gifts)
Increase of Group A Threshold from €225,000 to €280,000
This means up to €280k of valued of assets can be received from a Parent in a persons lifetime. A good increase but let it be noted that it was over €500,000 in ‘boom’ times.
Other groups seem to remain unchanged
Capital Gains Tax
Capital gains tax for self-employed business owners drops to 20%. A significant 13% decrease. For those selling their own business, this is a big advantage.
Potential Tax Planning
Possibility of transferring sole trader business to limited company and making a significant income tax saving – We await full details of conditions to qualify for 20%
NOTE: It does not affect sale of property by investors, for example ‘buy to let’ properties.
- Three year tax relief for start-ups is extended until 2018.
- Decrease of Corporation Tax rate by half to 6.25% for certain Research and Development Companies – A Knowledge Development Box.
Note that this relief is linked to employing staff and based on amounts of Employers PRSI paid by the start-up company.
Childcare and Child Benefit
- Free childcare for 3 year olds until they start school
- Increase child benefit by €5 to €140 per month – €10 if 2 or more children
- Paid Paternity leave of 2 weeks for fathers – Will self-employed get that too? Doubt it!
- Free GP for under 12’s – Planned to come in but when?
OTHER BUDGET MEASURES
- The 0.15% pension levy as it currently stands will no longer apply from January 2016
- Commercial motor tax rates on vehicles will be capped at €900 – good for the haulage/couriers industry
- Revaluation date of Property Tax to be suggested to move from 2016 to 2019
- Home Renovation scheme extended until 31 December 2016
- Cigarettes increase by 50c per pack, no change to alcohol or fuel
- VAT rate of 9% will remain unchanged as will other VAT Rates
- Cap on film relief expenditure to increase to €70 million
- Bank Levy to continue to 2021
- Minimum wage to increase to €9.15 – up 50c per hour
- Bank Card Charge of €5 removed – 12c transaction charge in its place (capped @ €2.50 or €5 depending on card type)
- Christmas bonus of €141 for jobseekers and €173 for pensioners on a weekly rate of €230
- Old Age pension up €3 per week, fuel allowance up €2.50 per week and respite grant to be restored to €1,700