The Irish government announced the budget for 2021 on the 13th of October 2020.
The budget outlines all of the governments’ spending and revenues including all government departments, agencies, non-commercial state bodies and local government sector.
2020 has been a year of unprecedented challenges for individuals, employees, entrepreneurs and business owners due to the outbreak of Covid-10. So, certain items raised in this budget may provide some relief to those affected.
This blog will guide you through the main points of Budget 2021 that will affect business owners and individuals in Ireland.
If you have any questions about these changes, please talk to a trusted advisor or contact your accountant. We’re here to help.
Personal Income Tax changes
- The self-employed Earned Income tax credit will increase to €1,650.
- The ceiling of the second USC rate band will increase from €20,484 to €20,687. This benefits individuals who earn minimum wage.
- The dependent relative tax credit will increase from €70 to €245. This benefits individuals who maintain a relative at their own expense.
- State Pension will stay at 66 years.
- The hourly minimum wage rate will increase from €10.10 to €10.20.
Changes to allowances
- Parent’s Benefit to be extended by 3 weeks to five weeks, for parents of children born or adopted from November 1, 2019.
- €43.5 increase in the rate of Fuel Allowance.
- €150 increase in the Carer’s Support Grant.
- €5 increase in the Living Alone Allowance.
- €10 increase in the Working Family Payment threshold for families with up to 3 children.
- The €425 earnings threshold for One-parent Family Payment will be removed.
Measures to support enterprise/SMEs
Value Added Tax (VAT)
Temporary reduction in VAT on Tourism and Hospitality goods and services from 13.5% to 9% from 1st November 2020.
Covid Restrictions Support Scheme (CRSS)
Businesses forced to close due to Covid-19 restrictions at Level 3 or higher will be able to claim up to €5,000 per week from Revenue. This will run from 13th October 2020 until 31 March 2021 and will be paid in addition to the Employment Wage Subsidy Scheme (EWSS).
Capital Gains Tax Entrepreneur Relief
An individual that owns at least 5% of ordinary shares for a continuous period of any three years (in the previous 5 years), now qualifies for this relief.
Additional tax measures
- The weekly threshold for the higher rate of employers PRSI will go from €394 to €398. This is to ensure there is no incentive to reduce working hours for a full-time minimum wage worker.
- The warehousing of tax liabilities will be expanded to include repayments of Temporary Wage Subsidy Scheme owed by employers and preliminary tax obligations.
- Extension of the Knowledge Development Box until the end of December 2021.
- Work will take place in 2021 on the development of a tax credit for the digital gaming sector and expected to support qualifying activities from January 2022.
Changes to vehicles
- New rates for Vehicle Registration Tax (VRT) being introduced from January 2021.
- New motor tax rates for cars certain cars registered in the State up to the end of 2020, or from January 2021.
- An additional €3.2 billion is being provided for the Pandemic Unemployment Payment, Employee Wage Subsidy Scheme and to support people upskill and re-enter the workplace.
- An increase of 2,000 places for Skills to Complete. This is for individuals who have lost their jobs as a result of Covid-19.
- An increase of 1,600 places for Skills to Advance. This is for upskilling and reskilling.
- A further 5,000 upskilling opportunities through Skillnet Ireland.
- Supports to incentivise employers to take on about 4,000 new apprentices and ensure 2,000 apprentices impacted by Covid-19 complete their program.
- The timing of the Budget 2021 means that it has been prepared on the assumption that the outcome of the negotiation between the EU and the UK will be a “hard” Brexit. “This would mean that from 1 January 2021 the EU and UK would trade on World Trade Organisation terms” – The Budget in Brief: A citizen’s guide to the Budget.
- An additional €340 million will be provided to continue work on existing projects and supports. The funding will be provided to the sectors most exposed to Brexit. For instance, Bord Bia, Local Enterprise Offices, Enterprise Ireland and IDA.
- This money will be provided in addition to the €3.4 billion Recovery Fund which addresses Brexit and Covid-19.
- This €3.4 billion fund will help businesses and workers respond to the challenges of Brexit and Covid-19 and distributed based on what is considered most effective at that time.
- An additional €500m package of stimulus and support measures to be provided for the remained of 2020. This includes waiving commercial rates for the rest of 2020 and additional investment in education and heritage.