Budget Briefing 2018: Video Commentary & Analysis

Budget 2018 was announced earlier today by the Minister for Finance and Public Expenditure and Reform, Mr. Pascal Donohue TD. As a broadly balanced budget, An Taoiseach Mr. Leo Varadkar described Budget 2018 as “no fireworks, no big bonanza”.

Click here to see the changes in tax rates and credits announced in Budget 2018 in our Comparison Guide to Tax Rates and Credits. Watch and listen below to ByrneWallace Head of Tax, Anthony Smyth describe the impact of Budget 2018 for you and your business.

Against a triple threat of Brexit, US trade and tax reforms and geo-political influences, Budget 2018 was presented by the Irish Government as a map for the national response to new risks and new opportunities. Reflecting current pressures on Irish society and economy, Budget 2018 introduced cuts to income tax and USC, allocated €1.8billion in funds towards the housing sector and announced new measures to assist SMEs in preparing for Brexit.

ByrneWallace reaction to Budget 2018  

Click on the image above to watch ByrneWallace Head of Tax, Anthony Smyth discuss what Budget 2018 means for you and your business.

Key measures announced in Budget 2018

Corporation Tax Rates

• Strong commitment to the 12.5% corporation tax rate
• Introduction of 80% cap on the amount of capital allowances for intangible assets and related interest that may be claimed each year against related income
• Extension of accelerated capital allowances for energy efficient equipment to end of 2020

Research and Development Tax Credit

• No change to the research and development regime

Personal Income Tax Rates and Bands

• Increase of €750 in the standard rate band for all earners
• Increase in standard rate for single individuals from €33,800 to €34,550
• Increase in standard rate for married/civil partnership one earner couples from €42,800 to €43,550
• Marginal rate of tax on income up to €70,044 is now at 48.75%

Personal Tax Credits

• Increase in Home Carer Tax Credit from €1,100 to €1,200
• Increase in Earned Income Credit from €950 to €1,150
• No changes to other personal tax credits
  

Personal Income Benefit-in-Kind

• Introduction of 0% benefit-in-kind for electric vehicles for one year

Employee Incentive

• Introduction of Key Employee Engagement Programme (KEEP)
• KEEP is a share based remuneration incentive for employees of unquoted SMEs
• Gains arising to employees on exercise of KEEP share options will be liable to CGT on disposal (not income tax, USC and PRSI).

PRSI

• No change to PRSI rates for employees
• Increase in employer PRSI by 0.1% per year over the next 3 years
  
• Establishment of working group to plan merger of PRSI and USC

Universal Social Charge

• No change to the exempt entry point of €13,000
• Reduction in 2.5% rate to 2% and increase in the upper limit of this band from €18,772 to €19,372
• Reduction in 5% rate to 4.75% for income between €19,372 - €70,044

Capital Acquisitions Tax (CAT) Rate, Thresholds and Exemption

• No changes to CAT rate, tax free thresholds or small gift exemption

Capital Gains Tax (CGT) Rate and Exemption

• No changes to CGT rate or annual exemption
• Reduction in holding period from 7 years to 4 years for exemption from CGT on disposal of certain land and buildings

Property Owners/ Landlords

• Tapered extension of mortgage interest relief for owner occupiers with qualifying mortgages (between 2004 – 2012):

(a)    75% of existing relief available in 2018

(b) 50% of existing relief available in 2019

(c) 25% of existing relief available in 2020

(d) Mortgage interest relief will cease after 2020

• Introduction of a pre-letting expenditure deduction of up to €5,000 per property (subject to conditions)

Developers

• Increase in vacant site levy from 3% to 7% for second and subsequent years
• Building of 3,800 new social houses in 2018
• Creation of new agency, ‘Home Building Finance Ireland’ to provide loans totalling €750m for commercially viable residential development projects
  

VAT Rates

• No change to rate on tourism and services sector
• No changes to standard or second reduced rate
• Introduction of a VAT refund scheme for charities in 2019 applicable to VAT expenses incurred in 2018

Local Property Tax Rates

• No change to the local property tax regime

Stamp Duty Rates

• Increase in rate on commercial property transactions from 2% to 6% (effective from 11 October 2017)
• Introduction of stamp duty refund scheme for commercial land purchase for the development of housing (subject to conditions)

Brexit

• Introduction of Brexit Loan Scheme to make €300m available to SMEs to assist with short-term working capital needs
• €50m ear-marked for Brexit response measures for agri-food industry
• Introduction of sugar tax on certain sugary drinks from 1 April 2018 (in line with UK sugar tax)

ByrneWallace will keep you informed on developments as Budget 2018 progresses into law. Our dedicated Tax Team are ready to assist you and your business in navigating the changes announced in Budget 2018.

Please contact any member of our Tax Team or your usual ByrneWallace contact for more information and advice.