How will the budget effect your business?
Budget 2020 was announced on Tuesday the 8th of October 2019. Here is a summary of the main changes that may impact your business in the upcoming year.
No changes in regards to tax rates, USC and VAT rates etc.
It has been positive though for enterprise and innovation. €1 billion will be allocated to the Department of Business, Enterprise and Innovation and €10 million will be given to a Disruptive Technologies Innovation Fund.
There were welcomed amendments made to KEEP, EIIS and R&D Tax Credits. These changes directly affect Ireland’s Startups and Entrepreneurs.
Employment and Investment Incentive (EII)
- The EIIS scheme allows investors relief against income tax for annual investments.
- The changes made are set to boost early-stage funding.
- The investment limit has gone from €150,000 to €250,000. There is also an increase to €500,000 for investments made over a term of 10 years.
- There are changes in the level of relief. The full relief which is 40% will be given in the year the investment is made. Currently, the relief is paid in two stages.
Key employee engagement programme (KEEP)
- The Key Employee Engagement Programme (KEEP) was launched in 2017. It was created to remove the need for employees to pay tax on share options in certain circumstances. The capital gain tax is still charged though if the shares are sold in a company.
- A key point of the KEEP initiative is to enable and allow startups and SMEs to compete with larger organisations for talent.
- There will be changes to the rules of the scheme to improve it in 2020.
- There will changes in the structure, allowing more flexibility in the structures of the company group.
- There will also be changes to the scheme’s rules regarding part-time and family-friendly working arrangements for employees.
Research and development tax credit
- The Research and Development tax credit will be increased from 25% to 30%. This will allow small and micro companies to have a better way of calculating the limit on payable credit. This incentive may help to boost innovation.
- Small and micro companies are allowed to claim tax credits before trading begins, but only if the companies are using pre-trading R&D.
- The limit of outsourcing to third level institutions of education has gone from 5% to 15%.
Income tax threshold
|Standard tax rate||20%||20%|
|Higher tax rate||40%||40%|
|Standard Rate Cut- off Point||2019||2020|
|Married Couple, 1 Income||€44,300||€44,300|
|Married Couple, 2 Incomes||€70,600||€70,600|
- There is no change to the income tax rates. It remains the same 20% and 40%.
- Up to a certain amount the first part of what you earn is taxed at the standard tax rate which is 20%. The rest of your income is then taxed at the higher tax rate of 40%. The amount you are entitled to earn before you pay the higher tax rate is called your standard rate cut off point. The above table illustrates the amount you can earn before being taxed at a higher rate.
- There is also no change in the standard rate bands.
Earned income tax credit
|Earned Income Tax Credit||2018||2019||2020|
- The earned income tax credit for the self-employed will increase by €150, going from €1,350 to €1,500.
- The difference between PAYE employees and self-employed people is getting smaller. There are no major changes to other tax reliefs in the budget.
Universal social charge (USC) rates
|First €12,012||0.5%||First €12,012||0.5%||First €12,012||0.5%|
|€12,012 – €19,372||2%||€12,012 – €19,874||2%||€12,012 – €19,874||2%|
|€19,372 – €70,044||4.75%||€19,874 – €70,044||4.5%||€19,874 – €70,044||4.5%|
|Balance over €70,044||8%||Balance over €70,044||8%||Balance over €70,044||8%|
|Non PAYE Income > €100,000||3%||Non PAYE Income > €100,000||3%||Non PAYE Income > €100,000||3%|
|Self-employed Income > €100K||11%||Self-employed Income > €100K||11%||Self-employed Income > €100K||11%|
- The entry point to USC remains at €13,000. There were no changes to the USC rates or thresholds.
Value added tax
|VAT for hotels, restaurants, and hairdressing||2019||2020|
- There is no change in the VAT rate in the 2020 budget.
- Since January 2019, VAT for hotels, restaurants, and hairdressing is the same rate as before the recession.
- Minimum wage will increase by 30 cents an hour to €10.10, only on the basis of an orderly Brexit. The wage will remain at €9.80 per hour until Britain’s exit from the EU and more details have been finalised.
- There will be an increase of €5 per week for the living alone allowance.
- There will be an increase of €15 to the one parent family payment and jobseeker transition payment.
- The Christmas bonus remains at 100% and will be paid to all social welfare recipients.
The qualified child payment will go up by €2 for children under 12 and by €3 for children over 12.
Home carer tax credit
- Stay at home spouses will see an increase of €100 in their home carer tax credit.
- One parent can also work part-time and still avail of this credit, given that their income doesn’t exceed €7,200 annually.
Capital acquisitions tax
|Inheritance Tax Threshold||2019||2020|
- You can receive gifts and inheritances up to a certain amount over your lifetime before you have to pay Capital Acquisitions Tax (CAT).
- The increase applies to the lifetime Group A tax-free threshold. Group A applies where the person who is receiving the gift or inheritance is a child of the person who is giving it.
- It has been increased by €15,000 to €335,000, which will come into motion from the 9th of October 2019.
- The Help to Buy scheme and The Living City Initiative will be extended to 31 December 2021.
Controlled foreign company (CFC)
Multinational companies who are moving their assets to another tax jurisdiction will face an exit tax of 12.5%