A billion to play with

Barry Kieran from Amatino Partners gives his key predictions ahead of Budget 2017, which is due to be announced on Tuesday afternoon...

 

Business Taxation

An increase in the Earned Income Tax Credit for the self employed to €1,100 (currently €550). This would be in line with Government promises to have a €1,650 tax credit comparable to that enjoyed by PAYE employees by 2018.

Income Tax increase for high earners

Both the Fianna Fáil (FF) and Fine Gael (FG) manifestos proposed to remove the PAYE tax credit of €1,650 for those earning over €100,000. FF also planned to reduce it for those earning over €70,000. Removal of this tax credit would result in employees paying €1,650 a year more in income tax. This removal would be intended to stop high earners benefiting too much from any USC reductions. An individual earning €100,000 per annum currently pays approximately €29,000 tax a year – so an extra €1,650 would not represent a significant increase.

Landlords

There has been talk of increasing the percentage of mortgage interest that can be claimed as an expense by landlords. It is currently 75% for residential properties and it is hoped that it will be increased to 80% in Budget 2017. Such a measure could help increase the number of properties available for rent.

 

Farmers

Currently, a farmer’s income can be taxed on an average basis over five years. However there is talk that Budget 2017 will bring about changes that will allow farmers, during years when profits are below the average, to pay tax based on their actual income for that year. Farmers will also benefit from any increase in the Earned Income Tax Credit outlined above.

 

Personal Taxation

USC Rate Cut - Recent leaks suggest that a 0.5% cut to the two lower rates of USC could be made (meaning they would go down to 2.5% and 0.5% respectively). The promised rate cut would appear to be politically out of reach for the minority government.

 

Increase in Tax Free Threshold for Gifts & Inheritances

The programme for Government promises a significant increase in the Class A threshold. This is the value of a gift or inheritance which can pass free of tax from a parent to a child.

The Class A threshold currently stands at €280,000 and, while a future threshold of €500,000 has been promised, this will most likely be phased in over a number of years with Budget 2017 offering an interim increase to €300,000 or €320,000. Some commentators have also suggested that there will be an increased threshold in respect of the family home.

 

First-time buyers

Financial Assistance in the form of a grant or Income Tax Rebate for First Time Buyers purchasing a newly built (but not second hand) home of between €5,000 and €15,000.

 

Other measures expected

• Increase in tobacco duty (anticipated to be between 30c and50c on 20 cigarettes).

• Increase in the state pension of up to €5 per week

• €50 million spend on medical cards for children in domiciliary care

• A new sugar tax which will take effect from 2018

• Help with Childcare Costs in the form of a means tested subsidy payment