This year’s Budget was the first budget after leaving the troika programme. It was also our first budget since the economy has started to recover and emphasis was very much placed on “building for the future”.
This summary will focus primarily on the Taxation measures presented by Minister Noonan with a brief outline of the Public Expenditure cuts announced by Minister Howlin.
The main features of Budget 2015 as they will affect you in business and in your personal life are as follows;
- Reduction in top rate of income tax from 41% to 40%.
- Increase in the standard rate tax bands by €1,000 for single individuals and €2,000 for married couples.
- Multiple changes to USC with changes to both the thresholds and rates.
- There is to be no change in the VAT rates, which includes the keeping of the 9% rate for the tourism / hospitality sector
- Farmers’ flat rate addition being increased to 5.2% from 5.0%
- Changes to income averaging for farmers by increasing the term from 3 to 5 years.
- Increase in the amount of income tax exempted from long terms leasing by 50% and introduction of a fourth threshold of lease periods of 15 or more years with an income of up to €40,000 been exempted.
- Removal of the 40 years of age threshold of leasing relief.
- Proposed changes to agricultural relief to ensure that relief will only apply to farm assets inherited or gifted to active famers and if not active famers then the relief will only apply if the land is leased on a long term basis to such farmers.
- Extending stamp duty relief for non-residential land transfers between certain close relatives.
- Extension of Home Renovation Tax Inventive Scheme to include expenditure on investment properties.
- DIRT exemption for first time buyers of savings used to finance the 20% deposit on a home.
- No changes in CGT or CAT rates
- Artist’s exemption threshold to be increased by €10,000 to €50,000.
- Changes to SARP & FED income tax relief measures to make the schemes more attractive.
- Increase in threshold of tax exempt income under rent a room relief by €2,000 to €12,000.
- Capital Gains Tax exemption for property purchases will not be extended beyond the end of 2014.
- 80% windfall tax on property development to be abolished from January 2015.
- No increase in excise duty on petrol or diesel.
- Cigarettes to increase by 40c per packet of 20 from 15 October 2014
- No change to Corporation tax rate
- DIRT remains at 41%
- Pension fund levy of 0.6% to be abolished by the end of 2014 and the levy of 0.15% to be abolished by the end of 2015.
- Tax relief at standard rate on water charges up to €500.
- Increase in child benefit by €5 from January 2015.
- €2.2bn to be spent on social housing over next 3 years.
Income Tax & Levies
This was the first budget in years where changes were made to income tax rates, standard rate cut-off points and Universal Social Charge (USC) rates or bands.
A summary of the key income tax changes is outlined below:
- 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. An increase in the tax bands by €2,000 applies to married couples.
- A reduction in the higher rate of income tax from 41% to 40%.
- Increase in income tax exemption from rent a room relief to €12,000.
- Increase in the amount of income exempt under long terms leases by farmers by 50%.
Universal Social Charges
- 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.
The 9% rate applicable to certain service industries (tourism / hospitality etc) will continue in 2014.
The farmer’s flat rate addition will be increased from 5.0% to 5.2% with effect from 01 January 2015.
Home Renovation Incentive (HRI)
This incentive which came into force following Budget 2014 provides a tax credit to homeowners who carry out renovation and improvement works on their principal private residences in 2014 and 2015. The tax credit is calculated at 13.5% of qualifying expenditure over €5k to a maximum of €30k. This scheme has now been extended to investment properties.
Capital Gains Tax (CGT)
No changes were announced with regard to CGT rates.
Retirement relief will be amended for farmers in respect of land leased out in certain circumstances. Increase from 15 years to 25 years.
CGT relief also available for farm restructuring where the first transaction is carried out by December 2015 and the restructuring is complete within 24 months.
The CGT relief for purchasing property before the end of December 2014 will not be extended.
Windfall tax which applies a tax of 80% to certain profits or gains from land disposal subject to planning decisions will be abolished from January 2015.
Capital Acquisitions Tax (CAT)
No changes were announced with regard to CAT rates or bands.
Changes to CAT are being introduced to target agricultural relief to farmers. In order to qualify for the relief the beneficiary must be an active farmer or lease the land to an active farmer.
The Government has stated its commitment to maintaining the 12.5% Corporation Tax rate.
Deposit Interest Retention Tax (DIRT)
No changes were made to the headline rate. However there is an relief from DIRT on savings by first time buyers used to buy a home before 2017.
Customs & Excise
Excise duty on a packet of 20 cigarettes is being increased by 40c with effect from 15 October 2013. No changes to duty on alcohol.
Tax relief at standard rate will apply on water charges up to €500.
VRT & Motor Tax
No changes were announced with regard to VRT and Motor tax.
The current pension levy of 0.6% will be abolished from 31 December 2014 and the additional levy of 0.15% introduced in 2014 will be abolished from December 2015.
Brief outline on the Public Expenditure measures
- Child Benefit – increase in the amount by €5 per child.
- Christmas – 25% Christmas bonus for social welfare recipients.
- Living alone allowance – increase of €9 per week.
There was a detailed public expenditure programme announced and the above is the top issues that will face the majority of people.
Over the coming days we will be reviewing the budget in detail and preparing appropriate analysis. If you require any clarification on any of the Budget matters please do not hesitate to contact your advisers as follows;