Budget 2013

There were no surprises in budget 2013 – most of the substantial changes were well flagged in the media. In terms of budget changes, the biggest income generator for 2013 will be increases in excise duties followed by social security and property tax. 

Income Tax

There has been no change to the income tax rates/bands/credits.

Social Security

The Pay Related Social Security (PRSI) base has been broadened from 2014 to include unearned income – this just affects employees as the self employed always paid PRSI on unearned income.

Removal of the weekly PRSI allowance from full rate and modified rate contributors will generate €265 million in 2013 and €289 million in 2014.  On average this will cost all employees €5 per week.  In terms of budget changes this will be the second highest income generator for 2013.

Capital Taxes

The Capital Gains Tax (CGT) and the Capital Acquisition Tax (CAT) rates have both increased by 3% to 33%.  However, the CAT thresholds have decreased by 10%.

Tax on Savings

The rate of retention tax that applies to deposit interest will be increased by 3%.

Corporation Tax

The Government has kept its commitment to keep the Corporation Tax Rate at 12.5% on trading profits.

Property Tax

There has been much speculation about the property tax and the form this would take – this is now clarified.  A Local Property Tax (LPT) will come into effect from 1st July 2013 with a half year charge applying to 2013.  The tax will be based on the market value of the property. There will be a system of market value taxable bands – the bands are narrow and the tax will be paid by reference to the mid-point of the band.  Owners of residential properties, including rental properties, will be legally responsible for payment of the tax.

The LPT will generate ¼ of a billion in 2013 and ½ a billion in 2015.

The Non Principal Private Residence tax will be abolished from 1/1/2014 and the household charge will be abolished from 1/1/2013.

Employers

The single biggest thing the Minister for Finance did for employers was not increasing the cost of employment – an increase in the rate of employers PRSI had been expected. 

Companies trying to generate exports are being encouraged to target new markets - with an extension of the foreign earnings deduction for employment related travel to certain countries in Africa.

Welfare Benefits

There has been no change to the ‘weekly’ benefits, but, as anticipated the monthly child benefit has been cut by €10.

While there is no change to the amount of the job seekers allowance, the period for which it will be paid will be reduced by 3 months – leaving less time to find a job which may be challenging.

Maternity benefit will be taxed from 1st July 2013.

Some people over 70 will have their medical card replaced by a GP only card, with a loss of all ancillary full medical card benefits.

Pensions

A measure has been announced to allow a one-time access to pension fund but only a fund generated by additional voluntary contributions (AVC’s) and not a core pension fund.  Any amount withdrawn will be taxed at the marginal rate.  The amount that you may take from a pension tax free is being preserved until a later date.

Excise duty

There has been no increase in excise duty on petrol/diesel.   However, the old reliables wine/beer/spirits/cigarettes will generate €326 million in extra revenue.  In addition, there will be a carbon tax on solid fuel.

Watch budget highlights and download PDF.

Imelda Prendergast - OSK Contracting and OSK Small Business Support.

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