Today the Minister for Finance, Pascal Donoghue, and Minister for Public Expenditure & Reform, Michael McGrath, have announced Budget 2022.
The national Debt is on track to reach €240bn, however, a strong recovery has helped stabilise the outlook and create a strong sense of positivity. Unemployment levels continue to fall, and near full employment is expected by the summer of 2022.
Taxation receipts have again been stronger than expected and allows more of a giveaway budget than previously expected.
- The retention of existing income tax rates (of 20% and 40%)
- Tax bands have increased by €1500 to €36,800 for single individuals and €45,800 for married single earner couples.
- An increase in the personal, earned and PAYE credits by €50 to €1,700 each.
- Universal Social Charge - ceiling of second rate band increases from €20,687 to €21,295
- Minimum wage rises 30 cent to €10.50 per hour
- Income tax deduction amounting to 30% of vouched expenses for heat, electricity and broadband incurred while working from home
- The maximum amount someone will pay for approved prescribed medicine under the Drugs Repayment Scheme will be cut from €114 a month to €100
Employment and Business supports
- Employment Wage Subsidy Scheme will remain in place, in a graduated format, until 30 April, 2022 - the scheme will close to new employers from 1 January, 2022
- Extra funding will be allocated to the Covid Credit Guarantee Scheme which provides low cost loans for businesses who were negatively impacted by COVID.
- Corporation Tax will remain at 12.5% for businesses with a turnover of less than €750m
- For businesses with a turnover of over €750m Corporation Tax will increase to 15%
- Digital Gaming Sector – There will be a new credit available to companies in the digital gaming sector. A company that incurs qualifying expenditure on design, production and testing of digital games can receive a tax credit of 32% on expenditure (min. spend of €100k per project & up to €25m max per project). European State aid approval required for this credit.
- Reduced VAT rate of 9% for the hospitality sector will remain in place to the end of August 2022
- Landlords allowed relief for pre-letting expenses for a further three years to encourage more vacant homes back to the market.
- The Enhanced Help to Buy Scheme will be extended to the 31st of December 2022
- €5,000 relief for Battery Electric Vehicles until 2023
- The BIK exemption for battery electric vehicles will be extended out to 2025 with a tapering effect on the vehicle value. This measure will take effect from 2023. For BIK purposes, the original market value of an electric vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025.
In reality, this means a €50k car bought now will be subject to BIK charge of approximately €5,000 per year in 2025.
Social Related Payments and Benefits
- €5 increase in State pension confirmed.
- €5 increase in weekly social welfare payments
- Parents Benefit will now be paid for 7 weeks from July 2022 (an increase of 2 weeks)
- National Childcare Scheme Universal subsidy will be extended to all children aged up to 15
- The Living Alone Allowance will increase by €3 per week (for those who are on pensions)
- The Back to school Allowance will increase by €10
- The cost of the price of cigarettes has increased by 50 cents bringing cigarettes to almost €15.
- Carbon Tax increases across all fossil fuels in the bid to cut our emissions in half by 2030
Much of Budget 2022 was leaked to the press over the past 6 weeks so there weren’t many surprises.
Changes to the BIK rules for electric vehicles were not mentioned in the speech, however, likely many of the “not nice” things made it to the printed version.
Some great plans emerging to assist new businesses and encourage further growth in the enterprise sector such as the €10 million allocated to the Digital transformation Fund to encourage businesses to move online and digitalise, along with a new €90 million Innovation Equity Fund which encourages early-stage companies with potential to scale up.
As always, we will need to see the contents of the Finance act 2022, where changes, additions and amendments to today’s budget are finalised. We will provide further updated when this in published next month.