BUDGET HIGHLIGHTS 2016
This Budget has been described as the most expansionary budget in 7 years. With economic growth of 4.3% forecast in 2016 as well as a drop in unemployment to 8% and the creation of 48,000 new jobs, Minister Noonan said the booms and busts of Ireland’s history are a thing of the past.
We have set out below the key points of Budget 2016 and welcome any comments and feedback you may have in relation to this Budget.
TAX MEASURES:
The only tax increase in Budget 2016 is a 50c increase in the price on 20 cigarettes, with pro rata increases for other tobacco products. This measure is forecast to raise €61.4m for the exchequer.
PERSONAL TAX:
Home Carer Credit:
This tax credit will increase by €190 to €1,000 and Income threshold for a home carer will increase to €7,200. Accordingly, a “stay at home” parent can earn up to €7,200 and still receive this credit.
USC:
From January 2016, the entry level for USC will be increased from €12,012 to €13,000.
Rates of USC will be reduced as follows:
- 1.5% to 1% – Income up to €12,012
- 3.5% to 3% – Income between €12,013 and €18,668
- 7% to 5.5% – Income between €18,669 and €70,044
Top rate USC exemption will remain for Medical card holders and individuals aged 70 years and older whose income does not exceed €60,000.
The reduction in the USC rates means that a worker who earns less than €70k per annum will have a marginal rate of tax of 49.5%.
For people who want to know how this will effect them, Minister Noonan said, on average, this USC reduction will be the equivalent to an extra weeks wages per year.
PRSI
A new tapered PRSI credit will be introduced for employees up to €624 per annum or €12 per week who earn between €352.01 and €424 in a week.
The ceiling for the higher rate of employers PRSI of 10.75% will be increased to €376 per week. The lower rate of 8.75% will apply to earnings less than €376.
SELF EMPLOYED
A new Earned Income Tax Credit will be introduced in 2016. A tax credit of €550 will be given to the self-employed and small business owners similar to the PAYE credit. Minister Noonan indicated that it is his intention to increase this credit in future budgets if permitted.
AGRI-FOOD SECTOR
General stock relief, stock relief for young trained farmers, stock relief for registered farm partnerships and the stamp duty exemption for young trained farmers has been extended to 31 December 2018.
A new farm succession transfer partnership model is to be introduced subject to EU State Aid approval. This will include an income tax credit of €5,000 per year for 5 years and will encourage transfers from older farmers to younger farmers.
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.
PENSIONS
The pension levy of .015% will end this year and not apply in 2016.
BANK LEVY
The Banking Levy is to be extended to 2021 which will raise €750m for the Exchequer.
MINIMUM WAGE
From 1 January 2016, the minimum wage will increase from €8.65 to €9.15 per hour.
CHILD BENEFIT
Child benefit is to increase by €5 per month per child from January 2016.
STATE PENSION
€3 increase per week for pensioners and carers aged 66 and over.
CORPORATION TAX:
KNOWLEDGE DEVELOPMENT BOX
The Knowledge Development Box will be introduced to provide 6.25% corporation tax rate on profits arising to certain IP assets which are the result of R&D activity carried out in Ireland.
CT START UP RELIEF
The 3 year Corporation Tax relief for start up companies will be extended.
EMPLOYMNET AND INVESTMENT INCENTIVE SCHEME (EIIS)
EIIS amendments that were pending EU State Aid approval for the past year will be introduced from 13th October 2015. The amount if finance that can be raised by a company under EIIS has been increased from €2.5m to €5m annually, up to a lifetime maximum of €15m.
CAPITAL TAXES:
CAT
The Group A threshold has been increased from €225,000 to €280,000 with effect from 14 October 2015. This applies to gifts and inheritances from parents to their children.
CGT
From January 2016, a new 20% rate of CGT will apply on the disposal of businesses up to a value of €1m.
INDIRECT TAXES:
VAT
No change in the existing VAT rates, including the 9% rate for tourism sector.
COMMERCIAL MOTOR TAX
Commercial road tax rates are to be reduced from January 2016. The existing rates will be replaced with 5 new rates ranging from €92 to €900.
ELECTRONIC PAYMENTS
Retailer fees for accepting debit card payments are to be halved.
The transaction limit on contactless payments is to be increased from €15 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 per ATM transaction up to a maximum of the existing stamp duty level.
