Budget 2016

The Minister for Finance, Mr. Michael Noonan and the Minister for Public Expenditure and Reform, Mr. Brendan Howlin presented their fifth Budget speech on Tuesday 13th October 2015. The following changes have been announced and are due to take effect from 1st January 2016, unless otherwise stated.

Taxation Measures

 

Tax Rates and SRCOPs

There has been no change to tax rates or SRCOPs. The standard rate will remain at 20% and the higher rate at 40%.

Personal Tax Credits

The following changes to tax credits will apply:

Earned Income Tax Credit

An Earned Income Tax Credit of up to €550 will be introduced for those with earned income who do not qualify for the PAYE Tax credit. This tax credit will primarily apply to the trading or professional income of self-employed people.

 

Where an individual qualifies for the Earned Income Tax Credit and PAYE Tax Credit, the combined tax credits cannon exceed €1,650.

Home Carer Tax Credit

The Home Carer tax credit will be increased from €810 to €1,000. In addition, the income threshold will be increased from €5,080 to €7,200. Where the carer’s income exceeds €7,200, the tax credit will be reduced by 50% of the excess income. This means the tax credit will be lost completely if the carer’s income exceeds €9,200.

Emergency Basis of Tax

There are no changes to the SRCOP and Tax Credits which apply under the Emergency Basis of tax.

Universal Social Charge (USC)

Annual income for USC purposes of €13,000 or less will be exempt from USC.

The 1.5% and 3.5% rates have been reduced by 0.5% to 1% and 3% respectively. In addition, the 7% rate of USC has been reduced by 1.5% to 5.5%. There has been no change to the 8% rate of USC.

For 2016, USC will apply at the following rates for those earning in excess of €13,000:

Rate Bands Rate
PAYE Income Non-PAYE Income
Up to €12,012 1% 1%
Next €6,656 3% 3%
Next €51,376 5.5% 5.5%
Next €29,956 8% 8%
Balance (in excess of €100,000) 8% 11%

Medical card holders and individuals aged 70 years and over whose aggregate income does not exceed €60,000 will pay a maximum rate of 3%.

The rate of 8% USC will continue to apply under the Emergency Basis.

Examples

Impact of Budget 2016 on a single person earning €25,000 and €45,000.

2015 2016 Difference
Earnings €25,000.00 €25,000.00 €0.00
Tax €1,700.00 €1,700.00 €0.00
PRSI €1,000.00 €1,000.00 €0.00
USC €894.60 €668.06 €226.54
Net Pay €21,405.40 €21,631.94 €226.54

 

2015 2016 Difference
Earnings €45,000.00 €45,000.00 €0.00
Tax €7,940.00 €7,940.00 €0.00
PRSI €1,800.00 €1,800.00 €0.00
USC €2,294.60 €1,768.06 €526.54
Net Pay €32,965.40 €33,491.94 €526.54

Home Renovation Incentive (HRI) Scheme

The HRI scheme has been extended for a further year, until 31st December 2016.

Local Property Tax (LPT)

The revaluation date for the LPT has been extended from 2016 to 2019. LPT is currently based on the value of a residential property as at July 2013. Properties were due to be revalued in 2016. The revaluation date has been postponed until 2019 so homeowners are not adversely affected by any increase in property prices.

Pension Fund Levy

A stamp duty levy of 0.6% was introduced in 2011 on the market value of assets under management in Revenue approved pension funds and pension plans i.e. Occupational Pension Schemes, Retirement Annuity Contracts and Personal Retirement Savings Accounts (PRSAs). This levy was increased to 0.75% for 2014 and reduced to 0.15% in 2015. This levy will cease in December 2015 and will not apply in 2016.

VAT

There is no change to the 9% VAT rate for the tourism sector in 2016.

 

Revenue Budget

The Revenue Commissioners will receive new funding of €75 million in 2016 for increased compliance interventions.

Film Relief

The cap on eligible expenditure which currently stands at €50 million is being increased to €70 million.

Start Up Relief for New Companies

This relief provides an exemption from corporation tax for new start-up companies for the first 3 years of trading. The relief is being extended and will apply to companies who commence to trade over the next 3 years.

 

Other Taxes

 

Excise Duty

There is no increase in excise duty on petrol, diesel or alcohol products.

The excise duty including VAT on cigarettes will increase by 50 cent on a packet of 20, with a pro-rata increase on other tobacco products from midnight on 13th October 2015.

Motor Tax

There are no increases in the rates of motor tax for private vehicles.

Motor tax for commercial vehicles will be reduced in 2016 with particular focus on large goods vehicles. The existing 20 commercial motor tax rates are to be replaced by 5 new rates ranging from €92 to €900.

Capital Acquisitions Tax (CAT)

The current Group A threshold of €225,000 will be increased to €280,000. Group A primarily applies to gifts or inheritances received by a child from a parent. This increase applies to gifts or inheritance received on or after 14th October 2015.

Capital Gains Tax (CGT)

Capital Gains Tax will be reduced from 33% to 20% in relation to the disposal in whole or part of a business up to an overall limit of €1 million.

 

Stamp Duty on Debit Cards

Stamp Duty currently stands at €2.50 per year on ATM cards and €5.00 per year on combined ATM/Debit Cards.

This duty is being abolished and will be replaced on 1st January 2016 by a 12 cent ATM transaction fee. The total yearly fee will however be capped at a maximum of €2.50 for ATM cards and €5.00 for combined ATM/Debit Cards with no effect to the consumer.

Finance Bill 2015

The Department of Finance is due to publish Finance Bill 2015 within the next few weeks.

 

Employment Law

 

National Minimum Wage

The National Minimum Wage will increase from €8.65 gross per working hour to €9.15 gross per working hour.

  • Workers under age 18 are entitled to €6.41 (previously €6.06) per working hour
  • Workers in the first year of employment over the age of 18 are entitled to €7.32 (previously €6.92) per working hour
  • Workers in the second year of employment over the age of 18 are entitled to €8.24 (previously €7.79) per working hour

Minimum wage for trainees: Employee aged over 18, in structured training during working hours: 1st one third of course €6.86 (was €6.49), 2nd third of course €7.32 (was €6.92) and 3rd part of course €8.24 (was €7.79).

Statutory Paternity Leave

Statutory Paternity leave of 2 weeks with Paternity Benefit for fathers will be introduced from September 2016.

 

Social Protection Measures

 

PRSI Changes

Employee PRSI – Class A

A tapered PRSI credit of up to €12 per week (€624 per year) will be introduced on 1st January 2016. This PRSI credit will commence in respect of weekly income of €352.01 and will taper out as weekly income reaches €424.

Employer PRSI – Class A

The threshold for charging employer PRSI at 10.75% will be increased from €356.01 to €376.01 per week. Employer PRSI at 8.5% will apply to weekly earnings from €38 to €376.

Social Welfare Payments

All pension payments including the State Pension (Contributory) will be increased by €3 per week. This increase also applies to Carer’s payments where the carer is aged 66 or over. Payments for qualified adults aged under 66 will increase by €2 per week and by €2.70 per week for qualified adults aged 66 years or over.

Carers allowance will be paid for 12 weeks (currently 6 weeks) from January, after the death of the person being cared for.

A Christmas bonus of 75% of an individual’s weekly payment will be paid this December to recipients of long-term Social Welfare payments, subject to a minimum payment €20.

The Fuel Allowance is to be increased by €2.50 to €22.50 per week in January 2016.

The income threshold for Family Income Supplement (FIS) will be increased by €5 per week for families with 1 child and by €10 per week for families with 2 or more children.

The Respite Care Grant will be restored to €1,700 in 2016.

 

Children and Families

Child Benefit will be increased by €5 per month in January 2016 to €140 for each child.

The Early Childhood Care and Education (ECCE) Scheme is being extended to all children aged from 3 years up to the age of 5½ or until they start primary school, whichever is earlier.

 

Health Measures

 

Free GP care

It is proposed to extend free GP Care for under 6s and over 70s which was introduced in 2015 to all children under 12 in 2016. This will be subject to negotiations with doctors’ representatives.

 

Public Service

 

Pension Related Deduction (PRD)

Budget 2016 did not make any change to the rates and thresholds for PRD. However, the Financial Emergency Measures in the Public Interest Bill 2015 is proposing the following changes:

  • In 2015, the annual PRD exemption threshold will increase from €15,000 to €17,500. The next €2,500 will be liable at 2.5%, with no change to the 10% or 10.5% rates. Once the law is enacted, these provisions will be back dated to 1st January 2015.
  • From 1st January 2016, the exemption threshold will increase from €17,500 to €26,083. The 2.5% rate will be abolished. 10% PRD will apply to earnings between €26,083 and €60,000, with no change to the 10.5% rate.
  • From 1st January 2017, the exemption threshold will increase from €26,083 to €28,750. 10% PRD will apply to earnings between €28,750 and €60,000, with no change to the 10.5% rate.

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