Budget 2017, announced on 11th October, was framed in the light of volatile political circumstances. In recent months the Minister for Finance, Michael Noonan’s now familiar “prudent” approach has come under severe pressure for increased public spending and the reversal of the various “austerity” measures of recent years.
There was some room for manoeuvre because, as Minister Noonan pointed out in his budget statement, “the economy is in good shape”. Continued strong and sustainable growth is forecast, employment is increasing and the national debt is expected to be down to 76% of GDP by the end of this year (it had reached 120% of GDP during the economic crisis).
However, Minister Noonan has acknowledged the necessity of putting in place “economic shock absorbers” to “reduce or eliminate the impact of future economic shocks”. Not least of these is the threat of a hard Brexit looming large over our economy which is so dependent on trade with the UK.
We have reviewed Budget 2017 and have outlined below the Top 10 Highlights for individuals and businesses:
1. Personal Income Tax
- Earned Income Tax Credit for self-employed and business owners who are ineligible for a PAYE credit increased from €550 to €950.
- Home Carer Tax Credit (which applies to married couples or civil partners where one spouse or civil partner works in the home caring for a dependent person) increasing from €1,000 to €1,100 for 20176. Home carer’s income threshold to remain unchanged at €7,200.
2. Universal Social Charge (USC)
- USC bands and rates amended as follows:
- From 2017 incomes of €13,000 or less will be exempt from USC. This exemption limit has not been changed.
- For incomes over €13,000, USC is chargeable as follows:
|Pre Budget 2017||USC %||Post Budget 2017||USC %|
|First €12,012||1%||First €12,012||0.5%|
|€12,012 to €17,576||3%||€12,013 to €18,772||2.5%|
|€17,577 to €70,044||5.5%||€18,773 to €70,044||5%|
|€70,044 to €100,000||8%||€70,045 to €100,000||8%|
|Surcharge on non PAYE income over €100,000||11%||Surcharge on non PAYE income over €100,000||11%|
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 @ 0.5%
- Income above €12,012 @ 2.5%
3. Corporation Tax
- 12.5% headline rate to be maintained
- An independent review of the Corporate Tax Code is to be undertaken
4. Reliefs for Entrepreneurs
- Capital Gains Tax (CGT) Relief for Entrepreneurs which was introduced from 1st January 2016 – CGT rate to be reduced from 20% to 10% (applies to chargeable gains on the disposal of the whole or part of a business up to a limit of €1 million)
- 9% rate for Tourism Sector retained
- Reduced from 41% to 39% for 2017
- To be reduced to 33% by 2020
7. Capital Acquisitions Tax (CAT)
- Increase in the tax-free thresholds for gifts/inheritances as follows:
- Parent/Child-Increased from €280,000 to €310,000
- Linear relatives (e.g. siblings, nieces/nephews, grandchildren)-Increased from €30,150 to €32,500
- Other beneficiaries-Increased from €15,075 to €16,250
8. Property (Existing Provisions)
- Home Renovation Incentive (HRI) (including works on rented properties) extended to 31st December 2018
- Rent a Room relief income threshold increased from €12,000 to 14,000
- Mortgage interest relief deduction for landlords to be increased from 75% to 80% for 2017 and to be increased to 100% over the following 4 years
9. Help to Buy Scheme
A new scheme has been introduced to assist the purchasers of new houses by means of a tax refund of up to €20,000:
- Applies to First Time Buyers
- Applies to the purchase of new or self-built homes
- Runs from 19th July 2016 to 31st December 2019
- Provided for a rebate of income tax paid by the purchaser over the previous 4 tax years
- Rebate up to a maximum of 5% of the purchase price of the property up to maximum of €400,000
- For property values between €400,000 and €600,000 a maximum value of €400,000 will apply
- No rebate on properties costing more than €600,000
- Requirement to take out a mortgage of 80% of the cost of the property
- Farm Averaging “Step Out” provision will allow farmers to opt of income averaging over 5 years for 2016
- Flat-rate addition will be increased from 5.2% to 5.4%
- Farm Restructuring relief for CGT is being extended to end of 2019
- €150m Loan Fund made available for flexible loan funding promised at rate of about 3% per annum
Generally this is being referred to the “fiver a week” Budget. Social Welfare payments have been increased by €5 per week from 1st March 2017 and the general effect of the tax measures is to give those on average earnings an additional €5 per week. There was a little for everyone and it would appear that Minister Noonan managed not only to balance the books but the demands of the various minority government partners.