After seven budgets of being worse off, this is the first time that low and middle income families will get more money in their pockets. There was more giving to, than taking from, people who are employed and they will be better off by approximately €5 to €15 per week. There was a strong focus on social recovery including measures to tackle the housing shortage and to get people to return to work and stay in work. Unemployment is expected to fall from 11.1% to just above 10% next year. Even though SME’s were described as the life blood of the economy, unfortunately there was not much to incentivise entrepreneurship or self-employment.
Capital Gains Tax (CGT)
The incentive that exempted property purchased by the end of 2014 from capital gains tax, if held for at least 7 years, is ‘no longer needed‘, and will be removed from 1st January 2015.
Capital gains tax retirement relief and CAT agricultural relief are to be extended to agricultural land that is leased.
An increase in the standard rate band of income tax by €1,000 from €32,800 to €33,800 for single individuals and from €41,800 to €42,800 for married one earner couples. A reduction in the higher rate of income tax from 41% to 40%.
Universal Social Charge
The Universal Social Charge, which worked on the principle that every citizen should pay some tax, is not quite so universal. Changes introduced will bring about 80,000 workers out of the charge. The rate increased from 7% to 8% for ‘the rich’ (described as those earning over €70,044). Only the self-employed will pay USC at 11% on earnings over €100,000 - no explanation was given for the higher rate being charged to the self-employed worker and not to the PAYE worker!
Incomes of €12,012 or less are exempt. Otherwise,
€0 to €12,012 @ 1.5%
€12,013 to €17,576 @ 3.5%
€17,577 to €70,044 @ 7%
€70,044 to €100,000 @8%
PAYE income in excess of €100,000 @ 8%
Self-employed income in excess of €100,000 @ 11%
Extension of the exemption from the 7% rate of USC for medical card holders whose aggregate income
does not exceed €60,000, who will now pay a maximum rate of 3.5% USC. Individuals aged 70 years and over whose aggregate income is €60,000 or less will pay a maximum rate of 3.5% USC.
No change to the 12.5% corporation tax rate applicable to trading income
Start Up Relief for Entrepreneurs
The seed capital scheme is being rebranded and extended to individuals who have been unemployed for 2 years.
3 Year Relief for Start Up Companies
The relief is being extended to new business start-ups in 2015.
Accelerated Capital Allowances for Energy Efficient Equipment
The measure which was due to expire at the end of 2014 is being extended to the end of 2017.
Research & Development (R&D) Credit
Ireland’s research and development regime will be improved by fully phasing out the R&D base year. The 25% tax credit applies to the amount of qualifying R&D expenditure incurred by a company in a given year that is in excess of the amount spent in 2003. This 2003 base year restriction is now being removed from 1 January 2015
Supporting the tourism sector with the retention of the 9% VAT rate.
VAT 2015 Place of Supply Changes
Cross-border EU telecommunications, broadcasting and electronically supplied services, from 1 January 2015, will be charged to VAT in the Member State of the consumer and not the supplier. As a net recipient of these services, it is estimated that Ireland will gain VAT revenues of €100m in 2015, rising to €150m in 2019.
Tax relief at 20% will be provided on water charges, up to a maximum water charge of €500 per annum (maximum credit €100). This may be a short term measure to ease the transition to water charges and may be removed in time.
Home Renovation Incentive (HRI)
The HRI is being extended to include rented property owned by landlords subject to income tax. The HRI provides an income tax credit to homeowners who carry out renovation and improvement works. This will encourage domestic growth and spending in the construction sector.
DIRT Interest - First time buyers DIRT relief
A relief from DIRT on savings used by first time house buyers towards the deposit on a home has been introduced. The relief is expected to work by allowing first time buyers reclaim the DIRT on savings up to a minimum of 20% of the purchase price. Despite the low rates of deposit interest, this is a positive measure.
The pension levy is to be abolished from the end of 2015.
Rent a Room Relief
The threshold for exempt income under the rent-a-room scheme is being increased to €12,000 per annum.
The budget speech is just an outline of the measures and full details will be provided in the Finance Bill and Finance Act. We will provide you with further updates as these are published.
OSK Accountants Dublin are one of Ireland’s leading firms and we are currently ranked in the top 20 accountancy firms in the country. Contact OSK Accountants Dublin for further details of Budget 2015.
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