Quintas Budget 2024 Overview
by Dave O'Brien
 

Budget 2024

Sinn Fein’s alternative budget proposed that the self-employed would pay a new solidarity tax of 3% on income above €140,000. This is in addition to the 11% USC rate on income above €100,000. The proposal would mean that the self-employed would pay 58% tax on any income above €140,000. Sinn Fein also proposed a substantial reduction in how someone can fund their private pension and an increase in inheritance tax to 36% from 33%.

In light of the above anyone in business should breathe a sigh of relief that today’s measures brought to us by the current government are fairly benign, albeit there are some challenges for small businesses such as the proposed slight increase in employers PRSI (which will continue to increase) and a €1.40 increase in the minimum wage (there was a rumour of a grant for small businesses to be available but that wasn’t mentioned in the budget speech).

There will be a change to retirement relief where the age will be increased from 66 to 70. This is a CGT relief for the purpose of passing assets to the next generation. The age increase is welcome. The Minister went on to mention a €10m limit to come in from 2025. I’m not sure whether this is for transfers between the ages of 66 and 70 or from the age of 55. If it’s the latter, then it will have a significant impact on how the relief works. If the limit applies to all age groups and your business is worth over €10m then you need to consider transferring the business to your kids in 2024 – the Minister didn’t return my call when I rang him to clarify 30 mins ago!!

With regards to landlords, while there was something for the small landlords, it was very small. A tax credit of an average of €850 per year for the next 4 years. The property needs to stay in the rental market for these 4 years to qualify. The objective here was to try to keep small landlords in the market – will a credit of €850 do that? I don’t think so. I believe this is literally throwing money away and won’t achieve its objective.

The minister mentioned there is to be work completed on Ireland having a proper participation exemption for dividends. This is definitely overdue and will allow Ireland to compete at a greater level as a holding company location. The Minister is also engaging with key stakeholders around interest deductibility for Irish companies but didn’t mention any more than that. The R&D regime has benefited from a 5% increase in the rate but also a doubling of the cash refund small companies can avail of –increasing from €25k to €50k.

One thing that really annoys me is items such as the double child benefit payment, the rental credit relief, and the energy credits among other small items. Why can’t these be targeted at those who need it as opposed to everyone? If we really want to help those out of the poverty trap surely there is a better way of doing it than giving wealthy people an extra couple of hundred euros that they might not even notice.

Looking forward to getting plenty more information from the Finance Bill which will be published next week. Expect lots of details on EIIS funding and changes to that regime. Many of these will be negative and hence the Minister's inclusion of a CGT relief for Angel investors in start-up companies which I expect is to limit the pain for those in the start-up scene which may see a future reduction in the amount of EIIS funding available. The Finance Bill will also have lots of information on the new 15% corporation tax rate for large entities. 

Lastly, a packet of 20 cigarettes is now €16.75. Wow…that has become an expensive habit. Vaping will be attacked next year.

Below is a summary of the tax provisions announced in today’s budget:

Summary of Measures

Tax Cuts / Personal Tax

  • Income Tax Band: Increase the 20% tax band by €2,000 (from €40,000 to €42,000 for a single person). This gives everyone earning at least €42,000 an extra €400 per year. There are pro rata increases for couples.

 

  • Tax Credits: The general tax credits will increase by €100 from €1,775 to €1,875. This gives most Irish people an extra €200 per year (regardless of whether you are self-employed or an employee). These credits are:

 

    • Personal Tax Credit
    • Employee Tax Credit
    • Earned Income Tax Credit

 

  • Incapacitated Child Tax Credit: Will increase by €200

 

  • Home Carer Tax Credit: Will increase by €100

 

  • Single Person Child Carer Credit: Will increase by €100

 

  • USC
    • Increase the lower USC rate band of 2% by €2,840 (from €22,920 to €25,760)
    • The higher rate of USC applied to earnings above that level up to €70,044 will come down 0.5 per cent to 4%
    • Extend the reduced rate of USC concession for medical card holders to 31 December 2025

 

Property Related Measures

 

  • Rent Tax Credit: Will increase from €500 to €750. This will be paid on a per person basis and therefore, couples can avail of a €1,500 tax credit. This credit has been amended so that parents can claim the credit for rent paid for student “digs”. This amendment has been backdated and so can now also be claimed for rent paid relating to 2022 and 2023.

 

  • Mortgage Interest Tax Break: This will be available for those who have an outstanding home loan of between €80,000 and €500,000 on a principal dwelling on 31 September 2022. Those who qualify will get 20 per cent relief on the increased amount of interest paid on their mortgage between 2022 and 2023. This relief will be capped at €1,250 per property.

 

  • Rental Residential Relief: This has been introduced to help keep rental properties in the market. Small landlords will benefit from this temporary tax break at the standard rate. This relief can be claimed from 2024 to 2027. The following rental income will be disregarded:

 

    • 2024- €3,000
    • 2025- €4,000
    • 2026 and 2027 – €5,000

The landlord's property must remain in the rental market for the full 4 years, otherwise, any relief received will be clawed back.

  • Vacant Property Tax: A tax that was introduced in last year’s budget to apply to residential property which is occupied for less than 30 days in 12 months. The tax has now been increased from 3 times that of LPT to 5 times.

 

  • Help to Buy Scheme: This scheme has been amended to include units purchased under the local authority affordable purchase scheme. The Help to Buy scheme has been extended until the end of 2025. The Help to Buy scheme is an incentive where first-time buyers can claim a maximum of 10% of the value of the property or €30,000 - whichever is lower. Changes to this scheme will be considered by the Government throughout next year.

 

 

VAT

 

  • VAT Registration Thresholds: From 1 January 2024, the existing VAT registration thresholds are being increased from €37,500 for services and €75,000 for goods to €40,000 for services and €80,000 for goods.

 

  • Oil & Gas (9% Rate): Extended for 12 months. This reduced rate will expire on 31 October 2024.

 

  • Audiobooks and ebooks: A reduction in the VAT rate from 9% to 0%. The change will be from 1 January 2024.

 

  • Solar Panels for Schools: The 0% VAT rate on the supply and installation of solar panels will be extended to schools.

 

  • Farmers Flat Rate Scheme: Decrease from 5% to 4.8%.

 

 

Business Taxes

 

  • Angel Investor Capital Gains Tax Relief: A new capital gains tax relief for angel investment in innovative start-ups is being introduced. Qualifying investors can benefit from a reduced rate of CGT (likely to be 10%) for gains arising from the disposal of a qualifying investment in a qualifying company. The maximum gain that can qualify for this relief will be twice the amount of the initial investment.

 

  • Retirement Relief: From 1 January 2025, the age limit will increase from 66 to 70 years and a limit of €10 million on the relief available for disposals to children before 70 years will be introduced.

 

 

  • Employment Investment Incentive (EII) Scheme: From 1 January 2024, the minimum holding period required to obtain relief is being standardised to four years for all investments. Also, the limit on the amount that an investor can claim relief on for such investments is being increased from €250,000 to €500,000. Further changes which will relate to EU state aid rules will be set out in the Finance Bill and are likely to be significant.

 

  • Research and Development Tax Credit (R&D): The R&D rate has now been increased from 25% to 30%. The first-year cash payment available has been doubled from €25,000 to €50,000. This is a major improvement for the scheme, especially for early-stage companies.

 

  • Film Tax Credit: The scheme allows for corporation tax relief on the cost of production of film in Ireland. The cap on eligible expenditure has been increased from €70 million to €125 million.

 

 

Sample of One-Off Cost of Living Allowances

 

  • Energy Credits (households): €450 per household paid in 3 instalments of €150 each. This will be paid directly to electricity providers. The first payment will be paid before Christmas and two further instalments in the new year.

 

  • Fuel Allowance lump sum: Fuel Allowance season starts on 25 September 2023. Only one Fuel Allowance is paid to each household. You can get it if you are aged 70 or over or getting long-term social welfare payments. The current rate of payment is €33 every week from 25 September 2023 until 5 April 2024.

 

  • Living Alone Allowance lump sum: An extra payment for people on social welfare payments who are living alone. The rate of payment is €22.00 per week from 7 January 2022.

 

  • Double Social Welfare: Once off double week Cost of living payment for all those in receipt of social welfare. To be paid in January 2024.

 

  • Christmas Bonus: Will be paid in early December for social welfare recipients.

 

  • Double Child Benefit: Double Child benefit payment of €280 per child, to be paid before Christmas.Child benefit has now been extended to include 18-year-olds in full-time education.

 

 

Agricultural measures

 

  • Stock Relief (Registered Farm Partnerships): This relief is being amended to increase the threshold from €15,000 to €20,000 in the case of qualifying periods commencing on or after 1 January 2024.

 

  • Young Trained Farmers and Succession Farm Partnerships: Stock relief for young, trained farmers, relief for succession farm partnerships and young trained farmers stamp duty relief are being amended to increase the aggregate lifetime amount of relief available to a person under these reliefs from €70,000 to €100,000 from 1 January 2024.

 

  • Accelerated Capital Allowance Scheme for Farm Safety Equipment: This scheme, which allows for accelerated capital allowances of 50% per annum for eligible equipment, is being extended to 31 December 2026.

 

  • Farm Consolidation Relief (Stamp Duty): Extended to December 2028. This relief reduces the rate of stamp duty applicable to intra-familial transfers of farmland from 7.5% to 1%.

 

 

 

Motor Tax / Climate Changes

 

  • Carbon Tax: another increase of €7.50 per tonne from €48.50 to €56 per tonne – The increase will take effect for auto fuels from 11 October, with the other fuels from 1 May 2024 after the winter heating season.

 

  • Concrete Blocks Levy: This is a 5% Levy introduced in last year’s budget on the use of concrete in construction from April 2023. This levy is being amended so that it will no longer apply to the pouring concrete used in the manufacture of precast concrete products. A refund scheme is also being put in place to allow those who paid the levy on such concrete between 1 September 2023 and 31 December 2023 to reclaim it.

 

  • Accelerated Capital Allowances: Energy Efficient Equipment: This has now been extended to 31 December 2025.

 

 

Miscellaneous

 

  • Cigarettes: Increased by 75 cents rather than the anticipated 50 cents. A pack of 20 cigarettes will now cost €16.75. The Government will consider an increase in e-cigarettes and vapes for next year’s budget.

 

  • Alcohol: No increase in the price of a pint or a glass of wine.

 

  • Pension: The old age pension will increase by €12 per week.

 

  • Welfare Payments: Will increase by €12 per week.

 

  • Childcare Fees: Aim to reduce childcare costs by another 25% from September 2024.

 

  • Free Schoolbooks Scheme: This has been extended to include students in the first three years of secondary school.

 

  • Revised Bank Levy: The Government has announced the bank levy will be extended and revised. They say they will take in €200 million from the banks.

 

  • BIK on Company Vehicles: The temporary universal relief of €10,000 applied to the Original Market Value of a vehicle (including vans) for vehicles in Category A-D and the amendment to the lower limit of the highest mileage band is being extended to 31 December 2024.

 

  • BIK on Electrical Vehicles: The tapering mechanism applied to BIK relief for Electric Vehicles is being enhanced by extending the current Original Market Value deduction of €35,000 until the end of 2025, followed by a reduction to €20,000 in 2026 and €10,000 in 2027.

 

  • VRT Relief for Battery Electric Vehicles: This relief was due to end on 31 December 2023, and is now being extended by two years to 31 December 2025.

 

  • Temporary Excise Rate Reduction: The temporary excise rate reductions applying to auto diesel, petrol and marked gas oil which were due to expire on 31 October 2023 are being extended until 31 March 2024. Half of the outstanding amounts of 8 cents on petrol, 6 cents on diesel and 3.4 cents on Marked Gas Oil will be restored on 1 April 2024, with the balance restored on 1 August 2024.

 

 

Summary

The 2024 budget had little bits for everyone. Nothing too dramatic from the average punter's point of view. A little bit more in everyone’s pocket from an individual's perspective. From a small business point of view, I think they have been hit hardest with minimum wage increase, I guess someone has to pay for all of this?

Should you like to discuss any part of the Budget, please feel free to contact either your usual Quintas contact or myself.

 

Regards

Dave O'Brien

Tax Partner - Quintas