2019 BUDGET SUMMARY
Tue Oct 9 2018
Small Reductions in Income Tax and USC
There is no change in income tax rates and the main tax credits and allowances. There is also no change in pension tax relief.
There a number of income tax changes applying in 2019:
- The standard rate band for single people will be increased by €750 and by €1,500 for married couples with two incomes. For higher rate taxpayers the increase will lead to a maximum tax saving of €150 pa or €300 pa for a married couple with two incomes.
Standard rate income tax bands
| 2018 | 2019 | |
| Single person | €34,550 | €35,300 |
| Married couple, one income | €43,550 | €44,300 |
| Married couple, two incomes | €69,100, transferable between spouses to a maximum of €43,500. | €70,600, transferable between spouses to a maximum of €44,300 |
- The Earned Income tax credit provided to the self employed and proprietary directors as an alternative to the PAYE tax credit which they can not claim, will be increased by €200 to €1,350. This will mean a tax saving of €200 pa for most self employed and proprietary directors.
- The home carer tax credit will be increased to €1,500. This credit can be claimed by a married couple who are jointly assessed for income tax where one spouse works in the home caring for a dependent person, e.g. a child.
Income tax credits
| 2018 | 2019 | |
| Earned income credit | €1,150 | €1,350 |
| Home carer tax credit | €1,200 | €1,500 |
The USC rates and bands will be adjusted in 2019 in two ways:
- The income band to which the 2% rate applies will be increased by €502.
- The current 4.75% USC will be reduced by 0.25%.
USC Rates and Bands
| 2018 | 2019 | |||
| First €12,012 | 0.5% | First €12,012 | 0.5% | |
| Next €7,360 | 2.0% | Next €7,862 | 2.0% | |
| Next €50,672 | 4.75% | Next €50,170 | 4.5% | |
| Balance | 8.00% | Balance | 8.0% |
The self employed 3% surcharge on incomes over €100,000 continues to apply.
For those with income (excluding the State Pension and other Social Welfare benefits) of more than €70,044 the Budget change will mean a USC saving in 2019 of €139 pa. There will be smaller USC savings for those on lower incomes.
Minor increase in the child CAT Threshold
The CAT Threshold which applies to benefits taken by children from parent has been increased by €10,000 to €320,000 with effect from 10th October 2018. There is no change in the other Thresholds or in the CAT rate of 33%.
The maximum Inheritance Tax saving from the increase is €3,333.
No change in Capital Gains Tax rate
Apart from a special deal for but to let investors, there is no change in the Capital Gains Tax rate of 33%.
DIRT reduces again but no change in exit tax
The DIRT rate is being reduced in stages from 41% in 2016 to 33% by 2020. This means the DIRT rate in 2019 will reduce from the current 37% to 35%, and in 2020 will reduce again to 33%.
Brokers Ireland and insurers have consistently argued for the exit tax rate to be tied to the reducing DIRT rate. Unfortunately no change has been announced in the Budget speech in the exit tax rate of 41%.
Good news for Buy to Let investors
From 2019 buy to let investors will be able to offset 100% of their mortgage interest against rental income for tax purposes, up from the current 85%. This will mean a reduced tax liability for most landlords with mortgages on their properties.
State Pension increase will unlock some AMRFs
The maximum rate of State Pension Contributory will increase by €5 pw from €243.30 pw to €248.30 pw from March 2019, or €12,912 pa.
The Christmas Bonus for the State Pension will increase to 100% in December 2018, from its previous 85% level. In June 2018 the Revenue confirmed that the State Pension Christmas Bonus could, once received, be counted as income for the purposes of the €12,700 specified income test to avoid having to invest €63,500 of DC retirement funds in an AMRF or annuity or to unlock an AMRF already held.
Because no change was announced in the AMRF amount or specified income test of €12,700, the Budget changes in relation to the State Pension will impact on retirees with DC benefits as follows:
| Already in receipt of the State Pension (Contributory) at the maximum rate of €243.30 pw and holding an AMRF | Their AMRF will automatically convert to an ARF when they get their 100% State Pension Christmas bonus in early December 2018.
|
| Holding an AMRF but under the State Pension Age. | No immediate change. Their AMRF will automatically convert to an ARF when they start to receive the State Pension (including the Christmas bonus) of at least €239.60 pw.
|
| A new retiree under the State Pension Age | No immediate change. They must still invest €63,500 in an AMRF or annuity at the point of taking their DC benefits , if not then in receipt of pension income of at least €12,700 pa. However their AMRF will automatically convert to an ARF when they start to receive the State Pension (including the Christmas bonus) of at least €239.60 pw. |
Increase in employer’s PRSI rates
Because of a 0.1% increase in the National Training Fund Levy (which is collected with PRSI) the employer’s PRSI Class A rate will increase from its current 10.85% to 10.95% in 2019, for employees earning more than €386 pw. For lower earners, the employer’s PRSI Class A rate will increase from 8.6% to 8.7% in 2019.
The employer PRSI Class A rate will increase again by another 0.1% in 2020 to 11.05% for those earning over €386 pw and to 8.8% for lower earners.
Further changes could happen in the Finance Bill
The Finance Bill which will implement the Budget changes will be published within the 10 days or so. It’s possible that other taxation changes not announced in the Budget could be introduced at that stage.
