BUDGET 2016
Michael Noonan, Minister for Finance delivered his fifth Budget speech on Tuesday 13th October 2015 while Minister for Public Expenditure & Reform, Brendan Howlin later outlined the measures in public spending. Up to € 1.5billion was available to spend and spend they did with one eye on next year’s general election. The young, the old, families and the vulnerable were all targeted for benefits in the speech.
However the measures contained here will help Ireland continue to recover and ensure Ireland remains an attractive country for investment and business. With unemployment in Ireland at 9.4% – the lowest in 7 years and down from 10.9% a year ago – the intention of Budget 2016 is to reduce this figure below 8% by the end of 2016.
As the Minister stated “Budget 2016 is about keeping the recovery going, building for the future and bringing that recovery to every family across the country”. With one eye on the elections within the next 6 months, the government have introduced several “carrots” to woo and delight the voter but primarily the low and middle-income earners as well as working families, though you could argue the actual savings all around are minimal :
Highlights at a glance….
• Universal Social Charge
o Exemption threshold € 13,000
o 1.5% reduced to 1%
o 3.5% reduced to 3%
o 7% reduced to 5.5%
• Income tax
o The introduction of an Earned Income Tax Credit to the value
of €550 for those with earned income & no access to the
PAYE credit, e.g. income from Schedule D I, II & III and
business owner/managers not eligible for the PAYE tax credit
• Capital Acquisition Taxes
o Parent to child inheritance threshold increased by € 55,000 to
€ 280,000 (Group A threshold)
• CHILDCARE
o Child benefit – up by € 5 to € 140 per month as promised last year
o Free early childcare from age 3 to 5½
o 8,000 new places created in the Community Childcare Subvention Programme
o €3 million set aside to develop after school services in school buildings.
o Free GP care for all children under 12 years of age
• State pension increased by € 3 per week
• Christmas bonus increased for pensioners and all social welfare recipients. Single person receives € 173 while a couple will receive € 327.
• Fuel allowance for pensioners increases 12.5% to € 22.50 per week for the 26 weeks. This affects 380,000 households
• Paid paternity leave – two weeks…
• Respite Care Grant of € 1,700 which is payable to those claiming Carer’s Allowance, Carer’s Benefit, Domicillary Care Allowance or Prescribed Relative’s Allowance ( not taxable and payable in the first Thursday of June each year ) is restored.
• Jobs – 2260 new teachers bringing teacher/pupil ratio down from 28:1 to 27:1 of which 600 will be resourced for special needs purposes. 600 new gardai will be recruited in 2016 along with 580 nurses.
• Housing
o € 120million earmarked for new housing
o 500 social houses in the greater Dublin area built over the next two years.
o NAMA to announce new house building programme – 20,000 homes as part of a € 4billion plan on its own lands by 2020
o More funding for mortgage to rent scheme
o Increase in funding for the homeless – € 17m
• Minimum wage increased to € 9.15 per hour ( up 5.78% )
• A 20-pack of cigarettes goes up by 50 cents – the only tax increase in the Budget
• No change to Corporation Tax at 12.5% or VAT rates BUT Budget ’16 sees the introduction of a 6.25% corporation tax rate for companies engaged in research and development called the Knowledge Development Box.
• Capital Gains Tax – reduced to 20% on all gains on the disposal of a business up to € 1million.
INCOME & OTHER TAXES
Income tax, Universal Social Charge & PRSI –
• Income tax
o Top rate remains 40%
• Universal Social Charge
o Exemption threshold increased to € 13,000
o 1.5% reduced to 1% (over € 12,012 up to € 18,668)
o 3.5% reduced to 3% (over € 18,668 and up to € 70,044 )
o 7% reduced to 5.5% (over € 70,045 )
This means that 700,000 low-paid workers will not have to pay USC and equates to the equivalent of one week’s wages in everyone’s pay packet
• PRSI
o Employees
The introduction of a tapered PRSI credit with a maximum level of €12 per week or €624 annualised
o Employers
Entry point to the top rate of 10.75% is being increased by €20 per week to €376 per week.
Corporation Taxes
• No change to the 12.5% rate and no changes foreseen in the medium term
• The introduction of a 6.25% corporation tax rate for companies engaged in research and development called the Knowledge Development Box.
SMALL & MEDIUM SIZED BUSINESSES
• The introduction of an Earned Income Tax Credit to the value of €550 for those with earned income & no access to the PAYE credit, e.g. income from Schedule D I, II & III and business owner/managers not eligible for the PAYE tax credit
• The Home Renovation Incentive Scheme has been extended to include rental residential properties
• 3 year corporate tax relief for start-ups extended
SOCIAL WELFARE BENEFITS
Child Benefit Allowances
• € 5 monthly increase to € 140
If you accept that it costs € 42,000 to send ONE child to completion of their 3rd level education ( source : Irish League of Credit Unions & Bank of Ireland ) then if you were to invest from the date of birth at the new rate of € 140 into the best regular saver account ( currently 3.5% – net 2.065% after DIRT tax ) for 18 years, to accumulate € 42,000 you would need an additional € 20 per month on top of the € 140 … and that’s just their 3rd level education !
o Free early childcare from age 3 to 5½ or until the child starts primary school – basically ECCE extended by a year
o 8,000 new places created in the Community Childcare Subvention Programme for low paid families
o €3 million set aside to develop after school services in school buildings.
o Free GP care for all children under 12 years of age ( still to be agreed with the GP representatives )
Homeless and social housing benefits
o € 17 million set aside for emergency accommodation for the homeless
o € 120million earmarked for new housing
o 500 social houses in the greater Dublin area built over the next two years.
o NAMA to announce new house building programme – 20,000 homes as part of a € 4billion plan on its own lands, 90% in the greater Dublin area.
o More funding for mortgage to rent scheme
Home Carer Tax Credit
o There will an increase of €190 in the Home Carer Tax Credit to bring it up to €1.000. Increase in home carer’s income threshold from €5,080 to €7,200
INDIRECT TAXES, EXCISE AND OTHER DUTIES
Tobacco – up 50 cents per pack of 20 – now costing € 10.50 per pack, with 25g packet of rolling tobacco increasing by 50 cent effective from midnight 14th October 2015
OTHER ITEMS
Pensions
• State pension up by € 3 to 233.30 per week
• The four year pension levy and pensions levy of 0.15% that was introduced from 2014 announced as part of the Jobs Initiative is now abolished. For now.
Fair Deal Nursing Home scheme
For the first time, the Government placed the Fair Deal nursing home scheme on a fully-funded, demand-led basis. This will continue in 2016, with the Government funding of €940 million. Everyone who needs Fair Deal funding will be approved within 4 weeks.
Under this scheme, you make a contribution towards the cost of your care and the State pays the balance. The scheme covers approved private nursing homes, voluntary nursing homes and public nursing homes. You can get the list of approved nursing homes from the HSE
Motor taxation
• Commercial vehicles tax – 20 rates reduced to 5 rates with the range from € 92 for the lowest to the top rate of € 900 per annum – previous top rate was € 5,195
Stamp Duty on ATM & debit cards
• Abolish current €2.50/€5 p.a. charge on ATM cards & combined (ATM & Debit) cards from 1st January 2016 & introduce a new12c ATM withdrawal fee capped at €2.50/€5 p.a.
For farmers, farming and the agri-food sector
• Extension of the general stock relief, the stock relief for young trained farmers, the stock relief for registered farm partnerships and the stamp duty exemption for young trained farmers for a further three years to the end of 2018
• Introducing a new succession transfer proposal to provide increased certainty about the timing of the transfer of a family farm to the next generation of farmers. This will greatly assist with long-term planning and farm productivity
• The proposal, which is subject to state aid approval, will allow two people, for example family members, to enter into a partnership with an appropriate profit-sharing agreement which makes provision for the transfer of the farm to the younger farmer at the end of a specified period, not exceeding ten years
• To support this transfer, an income tax credit worth up to €5,000 per annum for five years will be allocated to the partnership and split according to the profit-sharing agreement