We were promised a no deal Brexit Budget and Pascal Donoghue duly delivered. The Government delivered little or nothing to the average person on the street and it is difficult to argue that many will be happy with the budget. If the UK walk away from Europe on 31 October with no deal it may dictate whether the prudency of the budget will be viewed as a success or not. That being said, no one will have reason to be outraged.

The increase in property values that we are seeing has been catered for when it comes to inheritances as the tax free threshold for a gift from a parent to a child increased by €15k from €320k to €335k. We are still well below the €500k+ limits which were seen pre-recession.

The Government is aiming to reform the current Dividend Withholding Tax (DWT) regime. This should allow for timely collection of tax from dividends through the PAYE modernisation system. It will be a two-step process commencing with increasing the DWT rate from 20% to 25% from 1 January 2020. The aim is that the PAYE modernisation system will be used to reform the DWT process from 2021 using real time data. It will not impose any additional liability on taxpayers.

Summary of measures

Tax Cuts / Personal Tax

• There will be no changes to PAYE, USC and PRSI rates and tax bands. However, there will be a 1 year extension to the reduced rate of USC for medical card holders.
• The home carers credit has increased from €1,500 to €1,600.  
• The current Group A tax free threshold which applies primarily to gifts and inheritances from parents to their children is being increased from €320,000 to €335,000. This increase applies in respect of gifts or inheritances received on or after the 9th of October 2019.
• The rate of Dividend Withholding Tax (DWT) will increase from 20% to 25% from 1 January 2020. However, this will act as a transitional measure as Revenue aims to reform the process. From 1 January 2021, there will be a modified DWT regime utilising real-time data collected under the newly modernised PAYE system. It is intended that Revenue will apply a personalised rate of DWT to each individual taxpayer based on the rate of tax that they pay on their PAYE income. This will not impose any additional liability on taxpayers.

Property Related Measures

• Help to buy scheme is being retained - Extension in its present format until 31 December 2021.
• Living City Initiative - Extension in its present format until 31 December 2022

Investment Opportunities

• Employment Investment Incentive Scheme (EII) – enhancement of the scheme to allow investors claim 40% relief in the year of investment as opposed to the current system which allows for the 40% relief to be split between Year 1 (30%) and Year 4 (10%). Annual limits to be claimed by investors to increase from €150k to €250k and up to €500k if investing for 10 years or more.  

Foreign Employee Schemes

• Special Assignee Relief Programme (SARP) – extension in its present format until 31 December 2022
• Foreign Earnings Deduction (FED) - Extension in its present format until 31 December 2022

Agricultural measures

• Very little for farmers but extension of Capital Gains Tax (CGT) relief for farm restructuring. The relief provides for CGT relief where an individual dispose of and purchases land and/or exchanges land with another farmer in order to consolidate an existing farm. This relief was due to end on 31 December 2019 and has been extended to 31 December 2022.

 Miscellaneous

• Cigarettes are again increased by 50 cents. A packet of 20 cigarettes is now roughly €13.50
• No increase in the price of a pint or a glass of wine
• Carbon tax increase of €6 per tonne to €26 per tonne – The increase will take effect for auto fuels tonight, with the other fuels from May 2020 after winter heating season. It is expected that it will cost an additional €1.25 to fill a car from tonight.
• The income threshold to qualify for a medical card for over 70s has increased by €50 per week for singles and €150 per week for couples. For the second year in a row, the prescription charge payable by medical card holders aged over 70 is being cut incrementally by 50 cents.
• The monthly threshold for the drug payment scheme is being reduced by €10 per month, meaning no person or family should have to pay more than €124 per month for drugs and medical appliances.

Summary

This is the Government’s fourth and final budget and they duly delivered on their promise of a No Deal Brexit budget. The ordinary person on the street has not got much from this budget and should a No Deal Brexit occur at the end of the month, no one will complain too much. However, no one is particularly happy either.

Should you like to discuss anything contained in the budget, please contact either Dave O’Brien or Kevin Canning.