BUDGET 2018 – BUILDING THE REPUBLIC OF OPPORTUNITY
The Minister has tried to appease all by giving a small amount to all by means of some tax cuts/benefits and some welfare increases.
In Taxation the benefits are spread over Income Tax (“IT”), Capital Gains Tax (“CGT”), Capital Acquisitions Tax (“CAT”) and Value Added Tax (“VAT”).
- 20% rate band is increased by €750, which is a tax saving of €150 per annum.
- Self-employed persons credit increased from €950 to €1,150, but this is still some way below the Employee credit of €1,650.
- Home carer credit increased from €1,100 to €1,200, but that can still leave a married couple with dependent children and only one spouse working worse off by up to €3,910 per annum.
- Owner occupiers with mortgages taken out before 2012 will continue to get 75% mortgage interest relief for 2018, 50% for 2019 and 25% for 2020 subject to the maximum interest limits. No mortgage interest relief will apply after 2020.
- Up to €5,000 of pre letting expenses will be allowed where a property is let having been vacant for at least 12 months. The expenditure must be incurred before 2021 and will be withdrawn if having been granted the property is withdrawn from letting within 4 years
- For employees three new benefits arise:
- a 0% BIK on electric cars provided by the employer;
- a 0% BIK on workplace electricity provided for the car;
- a new share scheme for SMEs whereby the gain on the shares will be liable to CGT and not IT/PRSI/USC as at present. It will be fleshed out in the forthcoming Finance Bill and will operate from 01/01/2018 to 31/12/2023.
Universal Social Charge
Changes were well flagged in this area but are really minimal.
- The 2.5% rate is reduced to 2% and the band of income on which it is chargeable is increased by €600 to €19,372.
- The 5% rate band is reduced to 4.75%. This has the effect of reducing the marginal rate of tax on incomes up to €70,044 from 49% to 48.75%
Unfortunately the penal additional USC rate of 3% on self-employed income over €100,000 continues. This is a penalty that does not apply to Employees, Civil Servants, Politicians etc.
Capital Gains Tax
Only one change but possibly significant:
- The seven year holding period for exemption from CGT on property is reduced to a four year holding period so property that was going to be held for 7 years can, once this change is introduced, be brought to market earlier.
The property included is any relevant property purchased from 7/12/2011 to 31/12/2014.
Disappointingly, there was no change to the rate of 33% and no increase in the Entrepreneur’s Relief, which currently retains a rate of 10% on the first €1,000,000 of qualifying gain.
Capital Acquisitions Tax
For CAT Agricultural Relief (and CGT Retirement Relief) agricultural land under solar infrastructure will qualify as farm land, provided no more that 50% of the farm is under solar infrastructure. This will enable the land to be reduced in value by 90% for CAT purposes.
Again, disappointment at no change to the CAT rate of 33%, no increase in the lifetime threshold exemptions and no wiping of the slate clean for prior gifts/inheritances, which was last done in December 1991.
Michael Noonan, when Minister, had indicated the parent/child threshold would increase from its current level of €310,000 to €500,000. Let us hope it appears in the Finance Bill!!
Value Added Tax
Charities are to be allowed a rebate of a proportion of VAT incurred by them which will be calculated by reference to the level of non-public funds they receive.
- The relief will be available in 2019 for costs incurred in 2018.
Despite some clamour to increase the rate of VAT on Tourism activities the Minister has kept the rate at 9%.
The accelerated capital allowances on energy efficient equipment due to expire in 2017 is to be extended to the end of 2020.
In relation to the capital allowances on intangible assets the ceiling in any one year will be limited to 80% of the relevant income of that year in respect of expenditure incurred from midnight.
Surprisingly few hikes but one big surprise….
- Stamp Duty on non-residential property is raised from 2% to 6% with effect from midnight of 09 October 2017.
Where commercial land is acquired for housing then provided that development commences within 30 months there will be a Stamp Duty refund scheme, which presumably will be to repay the additional 4% paid. The forthcoming Finance Bill will explain how this will work.
- Cigarettes up by 50c for 20
- A Sugar Tax of:- 20c per litre of drinks with between 5gms and 8gms of sugar per 100ml, and 30c where the drinks contain 8gms or more.
- The VAT rate on sunbeds will increase form 13.5% to 23% from 1/1/2018
The vacant levy site will be payable in 2019 for land on the register but not developed in 2018 at 3% but thereafter at 7% per annum.
- With effect from the last week of March 2018:
- All weekly welfare payments are to be increased by €5 per week
- The State Pension is to be increased by €5 per week
- The Christmas Bonus will be paid this year at a level of 85% of benefit