The Budget 2018: How it can affect you and your wages

As the Minister of Finances, Pascal O Donoghue, gave his inaugural Budget speech on 10th October 2017,  there were few surprises. However, Halloween 2018 looks to be a dismal affair with fruit and nuts once more becoming the norm with the introduction of the new sugar tax!

Our summary of the Budget 2018 will look at the key points of interest that most people were concerned about prior to the announcement and look at how these areas were affected by the Minister’s announcement.

1. PERSONAL INCOME TAX

There have been no changes to income tax rates however the 20% band is increasing by €750 per annum from €33,800 to €34,550

Earned Income Tax Credit

The Earned Income Tax Credit will be increased by €200 from €950 to €1,150

Home Carer Credit

The Home Carer Tax Credit will be increased from €1,100 to €1,200

Universal social charge

The entry point for USC will remain at €13,000

The 2.5% rate is reduced to 2%

The 5% rate is reduced to 4.75%

The medium-term plan is to amalgamate USC and PRSI into a single insurance payment

Pay Related Social Insurance

There were no changes to general PRSI thresholds or employee PRSI announced in the Budget. However, as the National Training Levy is increasing, and it is collected as part of the employer PRSI contribution, employer PRSI will increase as follows:

8.5% increased to 8.6%

10.75% increased to 10.85%

Stamp Duty

An increase in the rate of stamp duty on commercial property from 2% to 6% was announced and this came into effect at midnight last night. However, a stamp duty refund scheme will be introduced for commercial land purchased for the development of housing, provided the relevant development commences within 30 months of the land purchase.

Mortgage Interest Relief

A tapered extension of mortgage interest relief for owner occupiers who took out qualifying mortgages between 2004 and 2012 was announced. 75% of the existing 2017 relief will be continued into 2018, 50% in 2019 and 25% in 2020. This relief will cease entirely from 2021

National Minimum Wage

The National Minimum Wage will increase from €9.25 to €9.55 per hour in respect of hours worked on or after 1st January 2018.

Workers under age 18 will be entitled to €6.69 per working hour

Workers in their first year of employment over the age of 18 will be entitled to €7.64 per working hour

Workers in their second year of employment over the age of 18 will be entitled to €8.60 per working hour

Social Welfare Payments

There will be a €5 increase in all weekly Social Welfare payments with effect from 26th March 2018. The maximum personal rate of Illness Benefit will be increased to €198 per week. Maternity Benefit and Paternity Benefit will be increased to €240 per week

Medical Prescriptions

Prescription charges reduced by 50 cents for all medical card holders under 70 (cut from €2.50 to €2.00).

Maximum monthly prescription charge cut from €25 to €20

Threshold for the Drugs Payment Scheme reduced from €144 to €134

Sugar Tax

Next April we will see a tax of either 20c or 30c per Litre. on sugar sweetened drinks.

2. CORPORATION TAX

Our Corporation tax has been the subject of constant scrutiny from the European Commission and OECD, so it is welcomed news that the Minister has stated that Ireland’s 12.5% corporation tax rate on trading income will remain unchanged.

Capital Allowances 

  • The deduction for capital allowances for intangible assets, and any related interest expense, will be limited to 80% of the relevant income arising from the intangible asset in an accounting period.
  • The scheme of accelerated capital allowances for energy efficient equipment is being extended to 31 December 2020.

Brexit

The Minister made clear in his speech that he was concerned of the dangers for the Irish economy arising from Brexit. It was decided to retain the 9% VAT rate for tourism. It was also acknowledged that SMEs would need to look beyond the UK and into other markets for trading purposes and would need support for this.

Loan Scheme

A new loan scheme of up to €300 million has been made available at a competitive rate to SMEs to help them with their short-term working capital needs.

This scheme is supported by the European Investment Bank Group, the European Commission and the Strategic Banking Corporation of Ireland.

It will give SMEs time to put in place the necessary changes to help their businesses grow into the future

Renewable Energy & Energy efficiency

Funds are being allocated to fund the rollout of the Renewable Heat Incentive and to incentivise the uptake of Electric Vehicles. In addition to the VRT relief (maximum €5,000) and the SEAI grant of up to €5,000, a 0% rate of Benefit-In-Kind is being introduced in 2018 for a period of 1 year.

Vacant site levy

The levy will increase from 3% in first year to 7% in the second and subsequent years.

SUMMARY 

Tax Credit2017 €2018 €
Single Person1,6501,650
Married or in a Civil Partnership3,3003,300
Employee Tax Credit1,6501,650
Earned Income Tax Credit Max9501,150
Widowed Person or Surviving Civil2,1902,190
Partner (without qualifying child)
Single Person Child Carer Tax1,6501,650
Credit
Incapacitated Child Credit Max3,3003,300
Blind Tax Credit:
Single Person1,6501,650
Married or in a Civil Partnership –
One Spouse or Civil Partner Blind1,6501,650
Married or in a Civil Partnership –
Both Spouses or Civil Partners Blind3,3003,300
Widowed Parent:
Bereaved in 20173,600
Bereaved in 20163,6003,150
Bereaved in 20153,1502,700
Bereaved in 20142,7002,250
Bereaved in 20132,2501,800
Bereaved in 20121,800
Age Tax Credit:
Single or Widowed or Surviving
Civil Partner245245
Married or in a Civil Partnership490490
Dependent Relative7070
Home Carer Tax Credit1,1001,200

Tax Rates and Tax Bands

Personal2017 €2018 €
Circumstances
Single or Widowed or
Surviving Civil33,800 @ 20%34,550 @ 20%
Partner, withoutBalance @ 40%Balance @ 40%
qualifying child
Single or Widowed or
Surviving Civil37,800 @ 20%38,550 @ 20%
Partner, qualifying for
Balance @ 40%Balance @ 40%
Single Person Child
Carer Credit
Married or in a Civil
Partnership, one42,800 @ 20%43,550 @ 20%
Spouse or CivilBalance @ 40%Balance @ 40%
Partner with Income
Married or in a Civil42,800 @ 20%43,550 @ 20%
Partnership, bothwith increase ofwith increase of
Spouses or Civil24,800 max.25,550 max.
Partners with IncomeBalance @ 40%Balance @ 40%

Peter Murphy is Managing Partner of Susan E Brown Chartered Accountants & Chartered Tax Consultants (www.sebca.ie ) and Managing Director of Cairde Accountancy & Taxation Solutions (www.icats.ie ).  Accountancy and taxation advise has been his business for over 20 years. He is a provider of expert but affordable Accountancy and Payroll services from offices at 97 St. Stephens Green Dublin 2.

Should anyone have further queries or require an understanding of another area of concern then please feel free to contact Peter directly.