Budget 2016 is aimed at improving the tax position for workers and in particular the lower to middle income earners. This is the second stage of a three year plan to reduce the income tax burden.
Key measures include:
- USC rates reduction
- CAT threshold increase
- CGT reduction
The budget should encourage consumer confidence and benefit domestically focused businesses.
However the marginal rate of income tax for high earning employees still remains comparatively uncompetitive by international standards and does cause concern in attracting foreign employees to Ireland.
- A new Earned Income Tax Credit of €550 will be available to the self-employed and proprietary directors.
- The 0.15% pension levy will be abolished with effect from 31 December 2015.
- The Home Carer’s Tax Credit will be increased from €810 to €1,000, with an increase in the carer’s income threshold from €5,080 to €7,200.
- There were no changes to the income tax rates or bands.
USC Bands & Rates
- The USC bands and rates for 2016 are as follows:
(down from current 1.5%)
(down from current 3.5%)
(down from current 7%)
- Medical card holders and individuals aged 70 years and over whose aggregate income does not exceed €60,000 will pay a reduced rate as follows:
- The first €12,012 @ 1%
- Income over €12,013 @ 3%
- Employer’s PRSI: the lower rate of employers’ PRSI of 8.5% will apply to a higher weekly threshold of €376.01 (up from €356.01).
- Employee’s PRSI: a new PRSI relief of maximum €12 per week will be introduced for employees insured at Class A whose earnings are between €352.01 and €424 per week.
Capital Acquisitions Tax
- Group A tax free threshold has been increased from €225,000 to €280,000 with effect from 14 October 2015. This is generally the threshold that applies to gifts and inheritances made by parents to their children.
- There was no change to the rate of CAT, which remains at 33%.
Capital Gains Tax –Entrepreneurs’ Relief
- Reduced rate of CGT of 20% will apply from 01 January 2016 to gains arising on the disposal by individuals of assets comprising the “whole or discreet part of a business”.
- This is subject to a lifetime limit of €1m.
- Start-up companies’ exemption has been extended to 2018.
- Knowledge Development Box: profits arising from certain patents and copyright resulting from R&D activities carried out in Ireland will be taxed at 6.25%.
- Film Relief Credit: The eligible expenditure cap has been increased from €50m to €70m. Since 2015 the relief is no longer available to individual investors, but to the producer companies in the form of a tax credit.
- The 12.5% Corporation Tax rate will not change.
Employment and Investment Incentive Scheme (EII Scheme)
- The annual amount of finance that a company can raise under the scheme is increased from €2.5m to €5m.
- The lifetime limit on finance that can be raised is increased from €10m to €15m.
- The scheme is expanded to include all SME’s, regardless of geographical location.
- The Home Renovation Incentive (HRI) scheme has been extended to the end of 2016.
- There was no change to the 9% VAT rate.
- The current €2.50/€5 per annum charge on ATM / Debit cards will be abolished from 1 January 2016 and instead a new 12c ATM withdrawal fee will apply which will be capped at €2.50 / €5 per annum per card.
- The date for the revaluation of homes for Local Property Tax (LPT) purposes has been postponed from 2016 to 2019.
- With regards to Microbreweries, the relief of 50% of Alcohol Products Tax due is now available upfront as well as by way of repayment of tax paid.