Budget Changes

Budget 2018 was announced on 10th of October 2017. We are pleased to bring you our summary of the main changes that will affect you and your business.

Income Tax Threshold

• The threshold of income earned that is taxed at the lower tax rate will be increased from 1st January 2018.
• This means employees can earn higher amount of income and still be taxed at the 20% income tax rate.

Earned Income Tax Credit

• The earned income tax credit for the self-employed will increase by €200, going from €950 to €1,150.
• However, there is still a disparity between the self-employed and PAYE employees who receive a PAYE tax credit of €1,650.
• This indicates a net benefit of €500 per year for PAYE employees.

Universal Social Charge (USC) Rates

• The entry point to USC remains at €13,000 however, the USC rates are being cut.
• The 2.5% rate will be reduced to 2% and the 5% rate will be reduced to 4.75% from 1st January 2018.
• These reductions mean that there is an increase in the amount of income earned that is taxed at the lower USC rate.
• This benefits employees earning the minimum wage.
• The 11% rate for self-employed income over €100K remains.

Minimum wage

• Minimum wage will increase by 30 cents an hour to €9.55 from the 1st of January 2018.

Employers PRSI

• Both PRSI rates are to increase by 0.1% in 2018 with a further 0.1% increase in 2019 and 2020.
• Employers PRSI is paid at the lower rate if employees earn €352 or less per week.

Home Carer Tax Credit

• Families with a stay-at-home parent will benefit from the €100-a-year increase of Home Carer Tax Credit.
• This works out at approximately €8.3 increase per month.

Deposit Interest Retention Tax (DIRT)

• DIRT rate will decrease by 2% from 1st January 2018 until 2020 when it reaches 33%.

Stamp Duty

• The rate of stamp duty on commercial property transactions has now been increased from 2% to 6%.

Capital Gains Tax

• The holding period has been reduced from 7 years to 4 years.

Capital Allowance Credit

• A tax deduction for capital allowance on intangible assets, such as intellectual properties, and any associated interest costs will be limited to 80% of the income on the intangible assets in a year.

Mortgage Interest Relief

• The budget announced mortgage interest relief was set to be abolished on 31st December 2017. However, it is now being gradually reduced.
• If you took out a home loan between 2004 and 2012, you get to keep your mortgage interest relief until 2020 but tapered each year from 2018 by 25%.
• In 2018, it will be reduced to 75%, in 2019 it will be 50% and in 2020 it will be 25% and unavailable thereafter.

Share-based Remuneration

• Budget 2018 announced New Key Employment Engagement Program (KEEP) scheme will be introduced to help SMEs attract and retain key staff.
• Share option gains will be exempt from income tax but will be liable to capital gains tax.
• This is a new incentive to reduce the tax burden on an employee receiving share options in an unquoted company.
• It ensures that any increase in the value of shares on offer will be subject to CGT only.
• No portion of the gain will be subject to Income Tax, USC and PRSI.
• Therefore, if an employee sees growth potential in a small firm, share options could be used to increase the value of the job without the downside of income tax burden.
• Applies to share options granted between the 1st January 2018 to 31st December 2023.

Brexit Budget

• The budget also announced a new fund worth €300 million to provide loans to assist SME businesses who are most at risk of any Brexit fallout.
• This will help with short-term working capital needs.

Compliance Measures

• In this budget funds are being allocated to the Revenue Commissioners to increase its technical capacity to tackle tax avoidance, transfer pricing case and PAYE modernisation.
• 40 new staff members will be hired whose main focus will be on Brexit and the opportunities and challenges that arise from it.

Pre-letting Expenses

• From now until 2021, pre-letting expenses on residential property will be deductible against taxable rental income.
• The expenses will be deductible up to a maximum of €5,000 per property and if the property has been vacant for 12 months or more prior to being rented.
• This will encourage more vacant properties into the rental market.

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Accountant Online is a firm of award-winning Chartered Accountants serving Ireland and the UK. We understand how important it is for you to meet your compliance obligations, while minimising your tax liability. We aim to save our clients money without compromising on the quality of our service.  Get in touch for a free consultation or send an email to hello@accountantonline.ie