The Irish government announced the budget for 2022 on the 12th of October 2021.
The budget outlines all of the governments’ spending and revenues including all government departments, agencies, non-commercial state bodies, and the local government sector.
2021 has been a year of unprecedented challenges for individuals, employees, entrepreneurs, and business owners due to the ongoing effects of Covid-19. One of the main focuses of the 2022 budget is to help individuals and businesses recover from the impact the pandemic has had.
This blog will guide you through the main points of Budget 2022 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.
A comment from our CEO and founder, Larissa Feeney
“The budget has not done enough to help struggling businesses recover from the pandemic. The extension of rates relief to December is welcome as is the extension of the EWSS scheme until April 2022. However, businesses will have no government support as they face the remainder of 2022. When these measures end, businesses will have to deal with how they will repay the tax debts that have been warehoused throughout the pandemic, as well as an increase in the VAT rate for those businesses in the hospitality and tourism sectors from August 2022.”
Personal Income Tax changes
- The hourly minimum wage rate will increase from €10.20 to €10.50. This is a key change that may impact business owners.
- The ceiling of the second USC rate band will increase from €20,687 to €21,295. This benefits individuals who earn minimum wage.
- An Income tax deduction of 30% of expenses for heat, electricity, and broadband incurred by employees working from home will be introduced. This is an increase from the current limit of 10%.
- The standard rate band for income tax will increase by €1500, from €35,300 to €36,800.
- Personal tax credit, employees tax credit, and earned income credit will increase by €50.
Changes to allowances
- €5 increase in carers weekly payment
- Significant changes in the means-testing for carers allowance will now mean that the first €50,000 in savings will be disregarded from the means test, up from €20,000.
- €5 increase in weekly Jobseekers’ allowance
- €5 increase in state pension
- €5 increase in fuel allowance
- €10 increase in the Working Family Payment
- €3 increase in the Living Alone Allowance
- The qualified child payment will increase by €2 to €40 for under-12s, and by €3 to €48 for over-12s.
Change to Corporation Tax
The 2022 budget has confirmed that the rate of corporation tax in Ireland will rise from 12.5% to 15% for companies with revenue above €750 million. This is in line with the global OECD agreement on tax.
Measures to support enterprise/SMEs
Value Added Tax (VAT)
The reduction in VAT on Tourism and Hospitality goods and services from 13.5% to 9% will be extended until the end of August, 2022.
Employment Wage Subsidy Scheme (EWSS)
The Employment Wage Subsidy Scheme (EWSS) will be extended until April 30th, 2022, although payment levels will be gradually tapered down. In December, January, and February, a two-rate structure of €151.50 and €203 will apply. In March and April 2022, a flat rate subsidy of €100 will apply. The scheme will also close to new employers from January 1st, 2022.
Employment Investment Incentive Scheme (EIIS)
The Employment Investment Incentive Scheme (EISS) will be extended for three years. The scheme will also be amended to make it more attractive to investors and open it up to a wider range of investment funds. The rule that 30% of an investment in an EII company must be spent before relief can be claimed will be removed.
Additional tax measures
- The weekly threshold for employers PRSI will go from €398 to €410. This is to ensure there is no incentive to reduce working hours for a full-time minimum wage worker.
- The number of PRSI contributions young people have to make to access dental treatment will be reduced from 260 to 39 weeks.
- A new tax credit is being introduced for the digital gaming sector. The relief will be available for 32% of eligible expenditure, for up to €25 million per project.
- The Tax Debt Warehousing Scheme will be expanded. It will now allow self-assessed income taxpayers with employment income who have a material interest in their employer company to warehouse income tax liabilities relating to their Schedule E income from that employer company.
- The commercial rates waiver for the hospitality, arts, and tourism-related sectors will continue until 31 December 2021. The waiver of commercial rates was introduced as a COVID-19 emergency support measure in March 2020.
Changes to vehicles
- Vehicle Registration Tax (VRT) relief for Battery Electric Vehicles (BEVs) will be extended until the end of 2023. This is to incentivise the uptake of electric cars.
- The BIK exemption for employers who make both new and used BEVs available to employees has been extended until 2025. This exemption was due to end on 31st December 2022.
Education and skills
- The maintenance grant for third-level students will be increased by €200 and the €200 contribution for post-Leaving Cert courses is to be abolished.
Here to help
If you need help understanding how these changes affect your business, talk to your accountant or contact our Client Services Team.
Larissa is a Fellow Chartered Accountant (FCA) and is the Founder and CEO of Accountant Online, which specialises in annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland, Northern Ireland and the UK.