Budget 2017 contained a little bit of everything and the improvements to the income tax regime for self-employed individuals were particularly well received. These changes go some way to reducing the bias in the system. The tax adjustments made in order to Brexit-proof the economy were also positive and the Institute urges the Government to now go beyond tax measures and look to protect travel and trade across both countries.
We have provided a brief summary of how Budget 2017 in the following and a more detailed analysis can be found in Chartered Accountants Tax Budget 2017 Special Newsletter.
Universal Social Charge
USC is reduced for low and middle income earners by reducing the rates by 0.5 percent as follows:
- First 12,012 @ 0.5 percent
- Next €6,760 @ 2.5 percent
- Next €51,272 @ 5 percent
The balance over €70,045 remains subject to the USC at 8 percent and the self-employed continue to be subject to the higher rate of USC of 11 percent on income in excess of €100,000. Medical care holders and individuals aged over 70 year and whose aggregate income does not exceed €60,000 will pay a maximum USC rate of 2.5 percent.
For a single person earning €35,000, the USC cuts mean a reduction of €178 in the USC liability in a tax year.
- Entitlement to the Invalidity Pension along with Dental and Optical Benefits will be extended to PRSI Class S contributors with no increase in PRSI contributions.
- The Earned Income Credit for the self-employed increases from €550 to €950
Home Carer Tax Credit
A €100 increase was announced to bring the credit to €1,100.
The rate of DIRT is set to reduce to 39% in 2017 and then by 2 percent each year until it reduces to 33% in 2020.
Cigarettes and Sugar Tax
- A tax on sugar-sweetened drinks is to be introduced in 2018
- The excise duty on a packet of 20 cigarettes is being increased by 50 cents (including VAT) with a pro-rata increase on the other tobacco products, with effect from midnight tonight
- The Minister stated his intention to extend mortgage interest relief beyond December 2017 to 2020 but deferred disclosure of the details until Budget 2018.
- Total income exempt from tax derived from the letting of a room or rooms in a person’s home is increased again in Budget 2017 to €14,000
- The 75 percent restriction on mortgage interest available as a deduction against rental income by landlords will be increased to an 80 percent deduction.
- Home Renovation Incentive is extended until 31 December 2018
- An income tax rebate incentive is to be introduced for first-time buyers of new homes to help fund the deposit as required under the Central Bank macro-prudential rules. The relief will take the form of a rebate of income tax paid over the previous 4 years up to 5 percent of the purchase price of a house costing €400,000. Pro-rata rates will apply to lower priced houses. Relief is capped at €20,000 and is not available for houses costing more than €600,000. The scheme will run until 2019.