The Government has unveiled a multi-billion-euro Budget 2024 package.
Speaking in the Dáil, Minister for Finance Michael McGrath said this is a budget which is framed against a backdrop of global uncertainty – both economic and geopolitical - and aims to provide further support to individuals, families and businesses at a time when the cost of living is high.
We have set out below a summary of the measures announced.
If you have any questions on any matter below please do not hesitate to contact us.
Please note : Measures announced today may change as the Finance Bill makes its way through the Houses of the Oireachtas and additional measures may be introduced by the Finance Bill.
Individuals/ Income Tax and Work
Income Tax Credits
- An increase of €2,000 in the income tax standard rate cut-off point for all earners, from €40,000 to €42,000 for single individuals and from €49,000 to €51,000 for married couples / civil partners with one earner.
- An increase of €100 in the Personal Tax Credit from €1,875
- An increase of €100 in the Employee Tax Credit from €1,875
- An increase of €100 in the Earned Income Credit from €1,875
- An increase of €100 in the Home Carer Tax Credit from €1,800
Rent tax credit
Mortgage Interest Relief
Note : No tapering of relief indicated so if a mortgage balance is over the €500,000 (eg by one euro at €500,001) then no relief is available.
Third Rate of Tax
No third rate of tax announced.
From 1 October 2024 all PRSI contribution rates will increase by 0.1%
- An increase of €2,840 to the 2% rate band ceiling from €22,920 to €25,760
- 4.5% USC rate reduced to 4% - this applies to income between €25,760 and €70,044
- Income of less than €13,000 are exempt from USC
- The reduced rate of USC concession for medical card holders is being extended for a further two years to 31 December 2025. Reduced rates of USC apply to individuals who have a full medical card and whose income is €60,000 or less.
Capital Acquistion Tax
- No change to tax rate (33% after thresholds)
- No change to annual small gift exemption (€3,000)
- Retirement Relief - extension from 1 January 2025 of upper age limit for the relief from 65 until the age of 70. It was also indicated that a limit will be introduced on disposals to a child up to the age of 70. Business owners therefore looking to avail of this relief for inter generational transfers show review their position and consider what steps they may wish to take before 1 January 2025.
- No change to tax relief on pension contributions
- No change to tax exemption on pension investment income
- No change to €200,000 tax free retirement lump sum
Small Benefit Exemption
No change to the small benefit exemption which currently enables an employer to give up to two benefits per year (to a maximum annual total of €1,000). Noted from 1 January 2024 employers will have enhanced reporting obligtions which will include the small benefit exemptions.
Benefit in Kind - Motor Vehicles
- The temporary universal relief of €10,000 to the Original Market Value is being extended by a further year to 31 December 2024.
- A temporary suspension of the tapering of the preferential BIK relief of electronic vehicles was also announced. This maintains the €35,000 Original Market Value reduction for 2024 and 2025. The reduction will then be €20,000 in 2026 and €10,000 in 2027.
VAT rate for gas and electricity
The Minister confirmed that the extension of 9% VAT rate for gas and electricity for a further 12 months to 31 October 2024..
Electricity credits for all households totalling €450 to be paid in 3 instalments of €150
Fuel allowance recipients will also receive a lump sum payment of €300.
A doubling of the tax disregard in respect of personal income received by households who sell residual electricity from micro-generation back to the national grid was announed.
From 1 January 2024, an income disregard of up to €400 per year will apply to profits or gains arising to a qualifying person from the micro-generation of electricity. This will provide relief from income tax, USC and PRSI.
Business Taxes and Supports
Corporation Tax Rate
The main corporation tax rate for trading remains at 12.5%. The Finance Bill will implement the 15% minimum effective tax rate for large companies as provided for under the OECD Pillar Two agreement.
Accelerated Capital Allowances / Energy Efficient Equipment
Scheme extended to 31 December 2025
CGT Angel Investor Relief
It was announced that this is being examined to refocus the relief with a view to further improving the incentives for founders and entrepreneurs in the innovative start-up phase, and to ensure it is contributing to employment creation.
The investment period is being standardised at 4 years and the amount an investor can claim on four year investments is doubled to €500,000.
A further review of EII is to be done in early 2024 which will focus on the potential for further simplification of the scheme.
VAT Registration Thresholds
An increase in the existing VAT registration thresholds for businesses from €37,500 for services and €75,000 for goods to €40,000 for services and €80,000 for goods respectively was announced.
Effective date for this increase to be confirmed (probably 1 Jan 2024 - TBC)
VAT and Charities
From 1 January 2024, the total annual capped fund for the Charities VAT Compensation Scheme is being increased up from €5 million, to €10 million
Research and Development Tax Credit
Finance Bill 2022 will introduce changes to the payment provisions for the R&D tax credit, to align with new international definitions of refundable tax credits.
The current system of offset against corporation tax liabilities and payment in three payable instalments is being changed to a new fixed three-year payment system. A company will have an option to call for payment of their eligible R&D tax credit or to request for it to be offset against other tax liabilities, and existing caps on the payable element of the credit are being removed. The first €25,000 of a claim will now be payable in the first year, to provide a cash-flow benefit for smaller research & development projects and to encourage more companies to engage with the regime. Transitional measures will be in place for one year, to smooth the transition to the new payment system for companies that are already engaged in research & development activities
R&D tax credit
The R&D tax credit is being increased from 25% to 30% and the first year payment threshold is being doubled from €25,000 to €50,000
VAT and Audio Books and eBooks
From 1 January 2024, the VAT rate for audiobooks and e-books is being reduced from 9% to zero.
Employer Pension Contributions
Corporation Tax relief will continue to be available on Employer Pension Contributions paid to an approved Occupational Pension Scheme subject to the overall maximum pension funding and benefit limits.
Employer Contributions to a PRSA
There is currently no limit on employer contributions to an employee’s PRSA (however, the overall standard fund threshold for an individual of €2m still applies).
Tax Relief - Employee Pension Contributions
This relief will continue at the marginal rate of income tax but subject to the Age-Related Contribution Limits and Earnings Cap (and overall Revenue Maximum Approvable Benefit limits).
Retirement Lump Sum
Up to €200,000 remains tax-free and amounts from €200,000 to €500,000 will be taxed at 20%.
Standard Fund Threshold
The total capital value of pension benefits that an individual can draw in their lifetime, the Standard Fund Threshold (SFT) remains at €2 million. There are significant additional tax liabilities where the limit is exceeded.
Welfare & Pensions
Social Protection Recipients
- €300 Lump Sum payment to all households receiving the Fuel Allowance payment in November 2023;
- A double payment of Child Benefit for families receiving this payment to be paid in December 2023;
- A €200 Lump Sum for pensioners and people with a disability receiving the Living Alone Increase in November 2023;
- A once off payment of €400 to all carers receiving the Carer’s Support Grant in November 2023;
- A once off payment of €400 to people receiving Invalidity Pension, Disability Allowance or Blind Pension in November 2023 ;
- A €400 Lump Sum in November 2023 to families receiving the Working Family Payment;
- Christmas Bonus in December, followed by a further Double Payment in January to assist with the Cost of Living; and
- €100 per child once off payment for those who receive the Increase for a Qualified Child(ren) on their social welfare payment, paid in November 2023.
Additional measures include :
- New Pay-Related Benefit to be introduced for Jobseekers in Q4 2024
- Weekly rates of qualified child payments will increase by €4 in January 2024 bringing them to €54 for those aged 12 and over and €46 for under 12s
- €12 across the board increase in weekly payments from January 2024
- Carers Allowance Earnings Disregard increased to €450 Single / €900 Couple
- Domiciliary Care Allowance will increase by €10 to €340 per month with effect from January 2024
- Free Travel scheme extended to people medically certified unfit to drive from July 2024
- Minimum weekly hours threshold for employers to avail of the Wage Subsidy Scheme reduced from 21 to 15 hours
- Hot School Meals scheme to be extended to further 900 Primary Schools who responded to Expression of Interest
- Working Family Payment thresholds for all family sizes to increase by €54 from January 2024
- Parent’s Benefit to be extended from 7 weeks to 9 weeks from August 2024
- Child Benefit extended to 18-year-olds in full time education from September 2024
- Provision for the Free Travel Scheme for people medically certified unfit to drive
- reduce the minimum weekly hours threshold from 21 to 15 hours for employers to avail of the Wage Subsidy Scheme which provides financial incentives to employers who employ people with a disability
- increase in the Carer's Allowance income disregard to €450 for a single person and €900 for a couple
- €10 increase a month in Domiciliary Care Allowance from January 2024
Vacant Homes Tax
The rate of the Vacant Homes Tax is being increased from three times to five times a property’s existing base Local Property Tax liability. This increase will take effect from the next chargeable period, commencing 1 November 2023.
Rented Residential Relief / Landlord Relief
A temporary tax relief has been introduced aimed primarily at small landlords.
Subject to certain conditions being met, rental income of €3,000 for the year 2024, €4,000 for 2025 and €5,000 for the years 2026 and 2027, will be disregarded at the standard rate.
A full claw-back of the benefit of the relief applies in the event the landlord removes from the rental market, within 4 years, any of the rental properties held in year 1 when the benefit is claimed. There is no clawback after the expiry of the 4-year period.
The relief relates only to tenancies registered with the Residential Tenancies Board, or where a landlord lets a residential property to a public authority (including a Local Authority).
In the case of joint ownership of a property, the relief will be divided in proportion to the percentage of the rental income to which each owner is entitled.
Rent Tax Credit
Whilst every effort has been made to ensure the accuracy of matters covered by this article, no responsibility for loss or damage occasioned by any person acting, or refraining from acting, as a result of matters above. Professional advice should always be sought before acting on any interpretation of matters covered by this article.
10 October 2023