Today the Minister for Finance & Public Expenditure has announced his Budget for 2020
While previous budgets took place against a backdrop of relatively strong economic growth the backdrop of today’s budget has been Brexit. It is also expected to be the final budget of this Fine Gael government supported by the confidence and supply agreement with Fianna Fail. As widely expected; expectations were dampened down and the budget prepared on the expectation of Brexit. The budget announced involves a package of €2.8billion and as expected Tax Policy is been shaped by Brexit. Overall it has been a pretty cautious budget with not much cash been giving out to the workers of Ireland
The retention of existing income tax rates (of 20% and 40%) and tax bands (€35,300 for single individuals and €44,300 for married one earner couples).
An increase in the earned income tax credit (introduced in 2015 for self-employed individuals) from €1,350 to €1,500. Again this is disappointing as it was expected to be put on parity with the PAYE credit a lot sooner
An increase in the home carer tax credit from €1,500 to €1,600.
USC rates remain unchanged with a one year extension of reduced rate USC for medical card holders.
0% BIK on Electric Vehicles have been extended to 2022
There has been no change to the sacred cow, all Corporation tax rates and surcharges remain as normlal, 12.5% on trading activities, non- trading 25% and surcharges of 20% for estate income and 15% for Professional Services still apply
This has increased from 10.95% to 11.05% as flagged in Budget 2019, a small increase on Employers, the lower rate is has gone up to 8.8% from 8.7%
VAT has been left alone, to the disappointment of the hospitality and tourism industry who have lobbied for a reversal of the recent increase
It had been flagged that there would be changes here but this has been left alone, although the Minister stated that a review will be done on this. It remains at 10% up to €1m disposal
Dividend withholding tax
This has been increased to 25% from January 2020, however a new real time system for withholding tax will be put in place from 2021
R&D Tax Credits
The R&D tax credit has been increased to 25% for small & micro businesses, however it’s always a difficult one to navigate as conditions are quiet onerous, so we will watch this space and see if any more information in Finance Act
The government has increased the rate of stamp duty on non-residential property from 6% to 7.5% with effect from midnight. Ireland will have the third-highest rate of stamp duty in the EU from tomorrow.
The Living City Initiative is being extended until 31st December 2022. This is a scheme of property tax incentives aimed at the regeneration of certain areas in Cork, Dublin, Galway, Kilkenny, Limerick and Waterford.
We also saw the extension of the Help to Buy scheme which has proven to be successful for first time buyers trying to get on the property ladder
The Employment and Investment Incentive scheme (EIIS), which was introduced to bolster early stage investments in start-ups and SME’s has seen some interesting changes.
It currently provides 40% relief for individuals who invest in qualifying companies however conditions can be onerous with only 30% granted up front with balance in year 4 providing employment conditions are met.
They have now changed to allow the 40% up front and have also increased the annual investment limit from €100,000 to €250,000
Overall there is not much to shout about with this year’s budget, If you are self-employed, and have a spouse who is a home carer, you will be better off by a whopping €20.83 per month, though if you smoke or drive a car you won’t be seeing much of that.
The Finance Bill, which is likely to include additional tax and anti avoidance measures will be published in the next few weeks. We will keep you updated with any relevant changes that may affect you.
Check out our online Tax Calculator to find out how the Budget 2020 impacts your Contract Pay.