Budget Review 2018

Minister for Finance, Paschal Donohoe T.D. today delivered his first Budget speech, in which he laid out a number of measures aimed at balancing the Budget next year, meaning “that we can devote additionalresources to tackling the needs of the Irish people and the economy in 2019 and subsequent years”.

Our view is that it was an extremely conservative budget, with sharper focus on political impacts in advance of an election cycle rather than on necessary social or monetary policy for the long term. The decision to increase VAT but make no changes to  Carbon Tax is an example of this as was the decision to increase the allowable offset of mortgage interest back to 100%. This will have little material difference to the country’s balance sheet but is a strong message to the governments supporters nonetheless.

On a purely ‘Personal Finance’ viewpoint, there were little or no changes. With major pension changes due in the pipeline for a few years from now, there was nothing of significance announced other than the increase to State OAP (including Christmas Bonus) meaning less people will be forced to lock their personal pension money away until age 75 in an AMRF.

Exit Tax on Life Investments (i.e. those taken out with Life & Pension companies) remains, for some unsubstantiated reason, at 41%, while DIRT continues to fall in line with Capital Cains Tax, which remains @ 33%. This reinforces our view that the structure of an investment is now almost as important as the underlying strategy.

The threshold for inheritance from parents went up a measly €10,000, which in no way reflects the increase in asset values among individuals and should result in additional income to Revenue. Gifting efficiently or insuring against the tax is the only viable option for affected individuals here.

Overall, not much to write home about. But there’s plenty more to come in the years ahead I’m sure.

Key Points 

• The format of finance decisions is now split and while the budget was light, there may be further changes announced in the Finance Bill that are far more impactful to our clients. We will issue further commentary on any such changes.

Other Key Measures Announced in Budget 2018

• Changes to the Universal Social Charge (USC) were announced:
2.5% rate reduced to 2.0%
€600 increase to €18,772 band ceiling
5% rate reduced to 4.75%
Incomes of €13,000 or less are exempt. Otherwise:
€0 to €12,012 @ 0.5%
€12,013 to €19,372 @ 2.0%
€19,373 to €70,044 @ 4.75%
€70,045 and above @ 8%
Self-employed income in excess of €100,000 @ 11%.

An increase of €750 in the income tax standard rate band for all earners, from €33,800 to €34,550 for single individuals and from €42,800 to €43,550 for married one earner couples.

• An increase in the Home Carer Tax Credit from €1,100 to €1,200.

• The Earned Income Credit of €950 is being increased to €1,150. This is available to taxpayers earning self-employed trading or professional income under Cases I, II and III of Schedule D and to business owner/managers who are
ineligible for a PAYE credit on their salary income.

• The excise duty on a packet of 20 cigarettes is being increased by 50 cents (including VAT) with a pro-rata increase on other tobacco products, with effect from midnight on 10 October.

• A €5 per week increase in all weekly social welfare payments, including disability allowance, carer’s allowance and both Jobseekers’ Allowance and benefit, as well as a further €5 increase in the State Pension. These measures
will take effect in the last week of March 2018.

• A tax on sugar sweetened beverages is to be introduced on 1 April 2018. The tax will apply to sugar sweetened drinks with a sugar content between 5 grams and 8 grams per 100ml at a rate of 20c per litre. A second rate will apply for
drinks with a sugar content of 8 grams or above at 30c per litre.

• A 0% benefit-in-kind (BIK) rate is being introduced for electric vehicles for a period of 1 year. This will for allow for a comprehensive review of benefit in kind on vehicles which will inform decisions for the next Budget. Electricity used
in the workplace for charging vehicles will also be exempt from benefit in kind.

• Tapered extension of mortgage interest relief for remaining recipients – owner occupiers who took out qualifying mortgages between 2004 and 2012. 75% of the existing 2017 relief will be continued into 2018, 50% into 2019 and
25% into 2020. The relief will cease entirely from 2021.

Pin It on Pinterest

Share This

Share this post with your friends!