The Minister for Finance Michael Noonan T.D. on the 13th October 2015 presented his 2016 Budget. Below I have summarised some of the key points in this Budget which I hope you will find informative.
The top rate of income tax remains at 40% and there are no changes to the income tax standard rate band.
The only changes in relation to tax credits are the introduction of a new Earned Income Tax Credit and the increase in the Home Carer Tax Credit:
Earned Income Tax Credit:
A new earned Income Tax Credit is being introduced for 2016. The tax credit is calculated at 20% of an individual’s earned income (excluding earned income that is taken into account for the PAYE Tax Credit) subject to a maximum of €550.
Where an individual has earned income that qualifies for Earned Income Tax Credit and PAYE Tax Credit, the combined tax credits cannot exceed €1,650.
HOME CARER TAX CREDIT:
The home carer tax credit has been increased from €810 in 2015 to €1,000 per annum in 2016.
PRSI & UNIVERSAL SOCIAL CHARGE
There are no changes to the PRSI rates and bands for 2016.
There are a number of changes to the Universal Social Charge as follows:
- Income €0 – €12,012 0%
- Income €12,013 – €18,668 0%
- Income €18,669 – €70,044 5%
- Income €70,045 – €100,000 0%
PAYE income in excess of €100,000 the USC rate will remain at 8% whereas in the case of non-PAYE income over €100,000, the rate remains at 11%.
Incomes less than €13,000 are exempt from the USC altogether.
CAPITAL ACQUISITIONS TAX (CAT)
The Group A threshold has been increased from €225,000 to €280,000. This increase applies to gifts or inheritances received on or after 14 October 2015.
CAPITAL GAINS TAX (CGT)
A new capital gains tax rate of 20% is being introduced to gains on the disposal, in whole or in part of a business up to an overall limit of €1million in chargeable gains. The new rate applies to qualifying disposals on or after 1st January 2016.
A new tapered PRSI credit is being introduced for employees insured at Class A whose earnings are between €352.01 and €424 per week, which will reduce the weekly PRSI bill for many employees.
The lower 8.5% Class A rate for employer PRSI will not apply to weekly earnings up to €376 (up from €356).
FARMING & AGRI SECTOR:
There are a number of incentives for this sector:
- Extension of general stock relief to the end of December 2018;
- Extension of stock relief for young trained farmers and registered farm partnerships to the end of 2018;
- The Stamp Duty exemption for young trained farmers extended also to the end of 2018; and
- Introduction of a new succession transfer proposal, which includes a new income tax credit of €5,000 per year for 5 years which will encourage transfers from older farmers to younger farmers.
The corporation tax exemption for certain “start up” companies is extended for a further three years up to the 31 December 2018.
KNOWLEDGE DEVELOPMENT BOX
Further details in relation to the Knowledge Development Box (KDB) will be announced later in the Finance Bill. This new relief will introduce a new 6.25% corporation tax rate on profits arising from Intellectual Property profits resulting from qualifying research and development expenditure carried out in Ireland.
EMPLOYMENT & INVESTMENT INCENTIVE SCHEME (EIIS)
It was announced that EIIS amendments introduced in last year’s budget have now been approved by the EU Commission.
The amount of finance that can now be raised by EIIS has increased from €2.5million to €5million annually, up to a lifetime maximum of €15million.
The required holding period for shares under the EIIS scheme has also been increased from 3 to 4 years.
LOCAL PROPERTY TAX (LPT):
The LPT revaluation date is to be postponed to 2019 which means that there should be no significant rise in LPT until then.
No changes in the existing VAT rates, including the 9% rate for tourism sector remains unchanged.
The rate of Motor tax is being reduced from 1st January 2016 for all vehicles above 4,000kgs, with a new annual rate of €500 for vehicles between 4,000kgs and 12,000kgs and €900 for vehicles over 12,000kgs.
TABACCO PRODUCTS TAX (TPT):
TPT rates are increased with effect from 14TH October 2015. The increase amounts to 50 cent, inclusive of VAT, on a packet of 20 cigarettes in the most popular price category, with pro-rata increases on other tobacco products. The minimum TPT rate on cigarettes is also increased.
The minimum wage is being increased by 50c per hour from €8.65 to €9.15 with effect from 1st January 2016.
Retailer fees for accepting debit card payments are to be halved.
The transaction limited on contactless payments is to be increased from €15 per transaction to €30.
To encourage the use of electronic payments by debit cards, the €2.50/€5 stamp duty on ATM/Debit Cards will be replaced with a 12c charge for ATM transaction up to a maximum of the existing stamp duty level.
It was confirmed that the pension levy of 0.15% introduced for 2014 and 2015 will cease at the end of 2015.
The banking levy is to be extended to 2021 which will raise €750 million for the Exchequer.
INCOME FROM WOODLANDS
Income received from forest/woodlands will no longer be included in the high earners restriction.
Child benefit will increase by €5 per child per month from January 2016.
FREE GP CARE:
The free GP care is to be extended to children under 12.
€3 increase per week for pensioners and carers aged 66 and over.
HOME RENOVATION INCENTIVE:
The scheme is being extended until 31 December 2016.
The cap on eligible expenditure under the relief is being increased to €70 million, this is subject to EU State Aid approval.
If you require clarification on any of the items contained within this Newsletter please do not hesitate to contact us and we would be delighted to speak with you.
Please note this summary has been written in general terms and should be used for guidance purposes only.