Budget 2018 | Liam Burns & Co | Accountants & Tax Advisers

Liam Burns & Co

Accountants & Tax Advisers

97 Malahide Road, Clontarf Dublin 3 D03 X2P6

Tel: +353 1 567 7380 This email address is being protected from spambots. You need JavaScript enabled to view it.

www.liamburnsandco.ie

We are delighted to present our summary of the taxation and spending measures announced by Finance Minister Paschal Donohoe in Budget 2018 yesterday.

The Budget comes on the back of a sustained period of growth and Minister Donohoe acknowledged how far the country’s economy has come over the past few years. Nonetheless, the Minister emphasised that the Budget must be in line an overall strategy to rebalance the economy.

There is €1.2 billion available for new spending and tax cuts, of which €900 million is being allocated to spending. The measures introduced are aimed at supporting an improved supply of housing, capital and infrastructure investment and helping businesses deal with the challenges presented by Brexit. As is the case each year , much of the detail on the proposed measures will not become apparent until the publication of the Finance Bill over the next few weeks.

Please contact us if you would like further information on any aspect of Budget 2018 and how it will impact your financial affairs from a personal or business perspective.

Budget Highlights

❖ The point at which an single income earner attracts the higher 40% income tax rate will increase in 2018 by €750 per annum to €34,550

❖ The second rate of USC has been reduced from 2.5% to 2% and the ceiling for this new rate will increase from €18,772 to €19,372 in 2018

❖ Earned Income Tax Credit for self-employed individuals will increase by €200 to €1,150

❖ The reduced 9% VAT rate for the tourism and hospitality industry will be retained

❖ The tax-free threshold for gifts / inheritances remains unchanged

❖ State pension and weekly social welfare payments will rise by €5 from March 2018

❖ 12.5% corporation tax rate remains unchanged

❖ A new Sugar Tax will take effect in April 2018

❖ There are a range of new measures aimed at improving the supply of housing

❖ Excise duty on a pack of 20 cigarettes to rise by 50 cents

Budget 2018 | Liam Burns & Co | Accountants & Tax Advisers

Tax Rates 2018 2017 Higher tax rate

40%

40% Standard tax rate

20%

20% Standard Rate Tax Band 2018 2017 Single individual

€34,550

€33,800 Married one income

€43,550

€42,800 Married two incomes

€69,100

€67,600

Personal Taxation

Tax Credits

• Personal Income Tax Credits - remain unchanged at €1,650 for single individuals and €3,300 for married couples.

• Earned Income Tax Credit will increase from €950 to €1,150 in 2018 for taxpayers earning self-employed trading or professional income and for business managers who are not eligible for the PAYE tax credit.

• PAYE Tax Credit remains unchanged at €1,650.

• Home Carer’s Tax Credit will be increased by €100 for 2018 to bring it up to €1,200 per year

Universal Social Charge (USC)

The USC rates applicable to income for 2018 will be:

• On the first €12,012 - 0.5%

• On the next €7,360 - 2.0%

• On the next €50,672 - 4.75%

• On the balance – 8%

• Self-employed earning in excess of €100,000 – 11%

The Budget 2018 changes to the USC rates and income bands reduces the top marginal rate of tax on income of up to €70,044 to 48.75%

A working group will be established to plan the amalgamation of USC and PRSI over the medium term

The Budget announced the following changes to the income tax standard rate bands:

The rates of income tax for 2018 remain unchanged at:

Budget 2018 | Liam Burns & Co | Accountants & Tax Advisers

Business Taxation

• The corporation tax rate remains unchanged at 12.5%. This is very positive and supports continued foreign direct investment and job creation.

• The scheme of accelerated capital allowaces for energy efficient equipment will be extended to the end of 2020

• A new restriction will apply to corpration tax capital allowances for intangible assets. These will be limited to 80% of the income arising from the intangible asset in a given year. This change takes immediate effect.

• A new Key Employee Engagement Programme (KEEP) is being introduced to support SMEs attract and retain key employees by providing for advantageous tax treatment on share options.

• A new Brexit Loan Scheme of €300 million will be available to SMEs at competitive rates to support short term working capital needs as a result of Brexit challenges.

Electric Vehicles

• There will be a 0% Benefit-in-Kind rate for employees receiving electric vehicles from their employers in 2018.

Indirect Tax

• The VAT rate on tourism and services remains unchanged at 9%

• A new VAT refund scheme will apply to charities

• Excise duty on a packet of 20 cigarettes will increase by 50 cents

• There will be no changes to the price of alcohol, petrol or diesel

Budget 2018 | Liam Burns & Co | Accountants & Tax Advisers

Property measures

• Mortgage interest relief for people with home loans from 2004 – 2012 will continue until 2020 but at just 75% in 2018, 50% in 2019 and 25% in 2020.

• The rate of commercial Stamp Duty will increase by 4% up to 6% with effect from midnight on 10th October 2017.

• The Vacant Site levy will increase to 7% in second and subsequent years that a site is vacant.

• A new Stamp duty refund scheme will apply for land purchased for the construction of housing.

• The 7 year ownership period of the Capital Gains Tax exemption is reduced to 4 years.

• The exemption from Stamp Duty for young trained farmers on agricultural land transactions remains.

Housing Initiatives

• €1.83 billion will be allocated to housing with 3,800 new social houses built next year by local authorities and approved housing bodies.

• The Housing Assistance Payment scheme will be increased by €149 million. Funding for homeless services will increase to more than €116 million.

• An additional €500 million will be allocated for the direct building programme to facilitate 3,000 additional new build social houses by 2021.

• Up to €750 million of the Ireland Strategic Investment Fund will be made available for commercial investment in housing finance. The funds will be made available through a new vehicle to be known as Home Building Finance Ireland (HBFI).

• For residential lettings, a new time limited deduction for pre-letting expenses will be introduced.

Budget 2018 | Liam Burns & Co | Accountants & Tax Advisers

Group A Son / daughter (or parent in certain circumstances) Group B Parent/Brother/ Sister/Niece/ Nephew/ Grandchild Group C Relationship other than Group A or B Group Threshold on or after 11/10/2016

€310,000

€32,500

€16,250

Gift & Inheritance Tax

• The rate of Capital Acquisitions Tax (CAT) which applies to gifts and inheritances remains unchanged at 33%.

• No increases were announced in Budget 2018 to the lifetime tax free thresholds for gifts and inheritances meaning that the current levels remain at:

Budget 2018 | Liam Burns & Co | Accountants & Tax Advisers

.

Health Measures

• There will be a reduction in prescription charges for all medical card holders under 70 years of age from €2.50 to €2 per item with a cap of €20.

• The Drug Payments Scheme threshold will be reduced to €134.

• Sugar-sweetened drinks will be taxed at a rate of 30 cent per litre on drinks with over 8 grams of sugar per 100 millilitres. There will be a reduced rate of 20 cent per litre on drinks between 5 and 8 grams of sugar per 100 millilitres. The tax will take effect in April 2018 subject to State Aid approval.

• The VAT rate on sunbeds will increase from 13.5% to the standard rate of 23%.

Social Welfare & State Benefits

• There will be a €5 increase in all weekly social welfare payments, including the State pension, with effect from the last week in March 2018.

• The Christmas bonus of 85% for social welfare recipients will be paid to all social welfare recipients in 2017.

• A €20 increase was announced in the earnings disregard for the One Parent Family Payment and Jobseekers’ Transitional scheme.

.

Budget 2018 | Liam Burns & Co | Accountants & Tax Advisers

Education

• The free Pre-School Programme will be further developed to ensure entitlement to the full two year service from September 2018.

• 1,300 teaching posts were announced for 2018 to reduce the primary pupil teacher ratio to 26:1.

• 1,000 extra Special Needs Assistants will be recruited before September 2018.

Other Measures

• 1800 additional frontline staff will be recruited across the health sector including the areas of acute, mental health, disability, primary and community care

• €55 million will be allocated to the National Treatment Purchase Plan

• 800 new gardaí will be recruited in 2018, along with 500 civilian staff

• A national Rainy Day Fund will be established in the coming year, with at least €1.5 billion to be transferred to it from the Ireland Strategic Investment Fund

Budget 2018 | Liam Burns & Co | Accountants & Tax Advisers

Please contact us if you would like further information on any aspect of Budget 2018.

Liam Burns & Co

Accountants & Tax Advisers

97 Malahide Road, Clontarf Dublin 3 D03 X2P6

Tel: +353 1 5677380 This email address is being protected from spambots. You need JavaScript enabled to view it.

www.liamburnsandco.ie

Disclaimer

The information provided in this document should only be used as a guide and does not constitute formal professional advice. No action or inaction should be taken on the basis of this document unless this has been the subject of independent professional advice. All information and taxation rules are subject to change without notice. No liability whatsoever is accepted for any action taken in reliance on the information in this newsletter.

We would recommend that professional advice is sought on a case by case basis. Please note that we are not legal advisers, therefore independent legal advice should be sought.