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Key Points from Budget 2016

13/10/2015

The Department of Finance is projecting economic growth of 6.2% in 2015 and of 4.3% in 2016.

48,000 new jobs will be created in 2016, which will bring the overall number of people working in Ireland to just over 2 million.

The Department of Finance has projected that national unemployment level will fall to 5% by the end of 2016, continuing the fall from its peak of 15% in 2012. Furthermore, it is forecast to reduce to 6.25% by 2021.

We must ensure that work pays for every family and household. A number of taxation changes are included in Budget 2016 to do this.

USC

The entry point to the USC will be increased from €12,012 to €13,000, taking an additional 42,500 people out from under the scope of the USC, meaning that, from January, an estimated 700,000 people will not be subject to the USC at all.

For incomes over this threshold, reductions in the USC rates are as follows:

  • The 1.5% rate is being reduced to 1%. This applies to the first €12,012 of income.
  • The 3.5% is being reduced to 3%. This applies to income in excess of €12,012 and up to the increased threshold of €18,668.
  • The 7% rate is being decreased to 5.5%. This applies to incomes in excess of €18,668 and up to €70,044.

 

These changes will bring the marginal rate of tax for all earners under €70,044 to 49.5%. This will be the first time that the marginal rate of tax has fallen below 50% for middle income earners, since the supplementary budget in April 2009.

All medical card holders, and those over-70 who earn less than €60,000 will continue to be exempt from the top rate of USC.

Childcare

There will be an extension of the free pre-school year, meaning free pre-school for all children from age 3 to primary school (there will be three windows for parents to enrol their children in the scheme – September, January and April).

Over €15m will be used to make pre-school more accessible for children who have special needs

Two weeks of new paid paternal leave will be provided, which will kick in for fathers from next September

There will be a €5 increase in child benefit, to €140 per child per month

Budget 2016 has provided for an extension of the Community Childcare Subvention Programme, which offers low income parents, reduced rates. 5,000 extra childcare places will be made available through private and community providers this year with a further 8,000 places next year.

A €3 million capital fund will be provided to support childcare providers to develop after-school services.

There will also be a number of measures to improve the quality of childcare provision, including an audit of all childcare, increased inspections and investment in training for childcare workers.

Investment in Key Services

Extra funding for housing — an extra €69m is being allocated for social housing, with an extra €17m for homelessness, and NAMA will build 20,000 houses over the next 5 years.

Free GP care will be extended to under 12s. There will be a €900m increase in health funding.

Investment has been allocated for the recruitment of 600 Gardaí in 2016.

Budget 2016 provides the funding for 2,260 new teachers and for a reduction in the pupil-teacher ratio from 28:1 to 27:1.

Support for the Elderly

A €3 increase in the weekly pension, recognising the contributions of the elderly.

Christmas bonus restored to 75% of weekly payment, €173 to a pensioner, from Dec 2015.

The fuel allowance will increase by €2.50 per week.

Support for Single Income Families

The Home Carer Tax Credit is being increased from €810 to €1,000, and there is also an increase in the home carer’s income thresholds from €5,080 to €7,200.

Capital Acquisitions Tax

The Group-A tax-free threshold, which broadly applies to transfers between parents and their children, from €225,000 to €280,000.

Local Property Tax

The revaluation date for the Local Property Tax is being postponed from 2016 to 2019.

Pension Fund Levy

The 0.15% pension levy will end this year, it will not apply in 2016. The original 0.6% pension levy ended in 2014, and I am pleased that, as of January, it will have ceased completely.

Supporting the Self-Employed and Small Business Owners

An Earned Income Tax Credit of €550 is being introduced for those with earned income who do not have access to the PAYE Credit.

A reduced Capital Gains Tax Rate of 20% will apply to the disposal in whole or in part of a business up to an overall limit of €1 million in chargeable gains.

The three-year tax relief for certain start-up companies is being extended for a further three years. This relief is an important support to entrepreneurs.

Excise Duties

The price of a packet of 20 cigarettes has increased by 20 cent – this is the only tax increase in Budget 2016.

The special relief reducing the standard rate of Alcohol Products Tax by 50% on beer produced in microbreweries will now be available upfront as well as through a rebate.

The 20 existing rates of commercial motor tax are being replaced with 5 rates, ranging from €92 to €900. The maximum of €900 per annum is a reduction from the previous maximum of €5,195 per year.

Other Tax Measures

The Home Renovation Incentive Scheme is being extended until December 31st 2016.

In terms of Agri-Taxation, General Stock Relief, Stock Relief for Young Trained Farmers, Stock Relief for Registered Farm Partnerships and the Stamp Duty Exemption for Young Trained Farmers are being extended until 31st December 2018.

A new farm succession transfer partnership model is being introduced, subject to EU State Aid approval.

Stamp Duty

The current €2.50/€5 per annum charge on ATM cards and combined (ATM & debit) cards will be abolished from January 1st 2016.

A new 12 cent ATM withdrawal fee will be introduced which will be capped at €2.50/€5 per annum.

The transaction limit on contactless payment cards is being raised from €15 to €30.