The normal comment on Budget Day usually elicits a Shakespearean line – much ado about nothing… but this year’s Budget had something for everyone.
Paschal Donohoe, Minister for Finance and Minister for Public Expenditure & Reform delivered his first Budget speech on Tuesday 10th October 2017 and announced some €1.2 billion in new public spending (67%) and tax cuts (33%). Expenditure in 2018 would exceed €60.9billion or € 12,700 for every man woman and child in Ireland. With unemployment currently at 6.1% and likely to fall to 5.7% during 2018 plus growth at 4.3% in 2017 and 3.5% in 2018, it was a “sweet budget” – all social welfare recipients received € 5 additionally from end of March 2018, income tax threshold increased and Universal Social Charge (USC) reduced while those with a sweet tooth especially for soft drinks have to pay between 20cents and 30cents extra for their tooth-decaying habit. A single person on € 45,000 will be better off by c. € 5 per week with these tax changes, those on half that about € 1 better off per week while couples on over € 75,000 each can look forward to an annual € 650 into their pockets.
These measures Minister Donohoe stated would “safeguard our national finances and help to rebalance our economy; promote fairness and provide for sustained improvements in people’s lives; and make sensible and long-term investments to benefit us now and into the future.”
Highlights at a glance….
- Universal Social Charge
- Two of these rates (2.5% & 5%) were reduced by up to 0.5% & 0.25% respectively.
- Income tax threshold
- Single rate of € 33,800 increased by € 750 to € 34,550
- State pension & all social welfare payments
- Increased from March 2018 by € 5 per week
- Christmas bonus
- 85% of the bonus will be paid December 2017 to those qualified
- € 1.83billion allocated for up to 6,000 new homes.
- Help to Buy scheme retained for first-time buyers relating to newly-built homes and based on the borrowers’ previous 4 years’ income tax.
- Mortgage interest relief extended but phased out by 2020
INCOME & OTHER TAXES
Universal Social Charge (USC)
- The three rates (1%, 2.5% & 5%) were reduced to 1%, 2% and 4.75%
- The new 2% USC rate ceiling increased from €18,772 to €19,372
- No USC is payable if you earn less than € 13,000
- Full-time workers on the national minimum wage of €9.55 an hour will not now pay the higher rates while the top marginal rate of tax on income up to €70,044 is now 48.75%.
The USC is earmarked to incorporate the Pay Relayed Social Insurance tax (PRSI ) and it is envisaged this will happen sooner rather than later.
- The point at which people enter the higher, 40% rate of income tax will rise from its current level of €33,800 by €750 for a single person to €34,550.
- Remains unchanged at 12.5%
Capital Gains Tax ( remains at 33% )
- The seven year period owners must retain qualifying assets to enjoy full relief from Capital Gains Tax is being reduced to four years.
Stamp Duty ( commercial property only )
- Increased from 2% to 6% from 11th October 2017
- A stamp duty refund scheme will be available to house builders subject to certain conditions …on land held and released for development.
- The 9% VAT (rather than 13.5%) on tourism and hospitality is retained.
- Sun beds attract a rate of 13.5% – this is now increased to 23% ( to act as a deterrent “due to the link to cancer from the use of sunbeds” )
Benefit in Kind
- There will also be a 0% Benefit-in-Kind rate for electric vehicles alongside the VRT relief and SEAI grant.
- Increased by 30cents per hour to € 9.55 per hour
SMALL & MEDIUM SIZED BUSINESSES
- Earned Income Tax Credit for self-employed increased by €200 to €1,150. This will benefit over 147,000 people
- A Brexit loan scheme of up to €300 million is being made available to SMEs, including food businesses, to help with short term working capital needs. The move is supported by European Commission, European Investment Bank and others.
SOCIAL WELFARE BENEFITS
- State pensions increased by € 5 per week to € 243.50 per week from March 2018.
- All other social welfare payments increased by € 5 per week ( to € 198 pw ) This includes jobseekers’ benefits, the one-parent family payment and carers’, jobseekers’ and disability allowances. This comes at a cost of €301 million.
- Home Carer Tax Credit – €100 increase to €1,200 per annum
- Telephone Support Allowance of €2.50 per week for those in receipt of both the Living Alone Allowance and the Fuel Allowance – the latter increased by a week from 26 weeks to 27 weeks.
- One Parent Family Payment and the Jobseekers’ Transitional scheme increases by €20 per week
- The threshold for receipt of the Family Income Supplement rises by €10 per week for families with up to three children while the weekly rate of the qualified child payment is going up by €2 per week
- The Early Childhood Care and Education Scheme and the pre-school scheme will be extended with a further €86 million provided for the full year costs.
HOUSING, THE HOMELESS AND OTHER SOCIAL HOUSING BENEFITS
- Help to Buy scheme retained for first-time buyers up to € 400,000 purchase price by way of a 5% income tax refund. Maximum payment is € 20,000 over a 4 year period and only eligible up to a purchase price of € 600,000. The rebate will be of income tax paid over the previous four years and only purchases of new homes will qualify. The applicants must also take out a mortgage of 80 per cent of the purchase price to qualify.
- Mortgage interest relief due to end 2017 for those who took out mortgages between 2004 and 2012 is extended but will be phased out by 2020 .. 75% of the rate in 2018, 50% in 2019 and 25% in 2020.
- Homeless budget increased by € 18m to € 116m
- €1.83bn in funding for housing, with 47,000 new social housing units by 2021 still the target, 3,800 of them built in 2018 by the local authorities and approved housing bodies. A further €500 million for direct building was allocated which should lead to an additional 3,000 new build social houses by 2021 in addition to this existing 47,000 target.
- 4,000 social housing homes will be delivered next year through the Social Housing Current Expenditure Programme
- A new agency, Home Building Finance Ireland, created to use NAMA’s experience and provide cheap loans to developers will be funded by monies from the Irish Strategic Investment Fund (ISIF) to the value of €750 million.
- An additional €149million allocated for the Housing Assistance Payment, which would enable an additional 17,000 households to be supported and accommodated in 2018
- The vacant site levy, due to take effect from 2019, will increase from three per cent to seven per cent in 2020
INDIRECT TAXES, EXCISE AND OTHER DUTIES
- Tobacco – up 50 cents per pack of 20 – now costing nearly € 12.00 per pack, with 30g packet of rolling tobacco will now be more than € 15 – effective from midnight 10th October 2017
- No change on petrol/diesel or alcohol
- A tax on sugar sweetened drinks will, from April 2018, be applied at a rate of 30 cent per litre on drinks with 8g of sugar per 100ml. A reduced rate of 20 cent per litre will apply on drinks with between 5g and 8g of sugar per 100ml.
For farmers, farming and the agri-food sector
- The consanguinity stamp duty relief at 1 per cent for inter-family farm transfers is retained for a further three years.
Minister Donohoe concluded “We are increasing our current spending in line with how we expect the economy to grow so, that we can continue, step by step, to deliver sustainable improvements for all, and where we are spending more, on our schools, hospitals, homes and public transport we do so to bring a secure, productive and fairer future that bit closer.”