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Budget 2019

Executive Summary

This year’s Budget was the third and final budget of the current government’s confidence and supply agreement with Fianna Fail. It remains to be seen if there will be a fourth.

Brexit and the potential implications have underpinned the preparation of Budget 2019 and the budget was prepared on the expectation of a “orderly” exit of the UK, with a transition period, and ultimate “soft” exit following some form of bilateral trade agreement between the UK and EU.

Eliminating the budgetary deficit forms a key part of the Government’s policy response to Brexit. The Government is also establishing a Rainy-Day Fund in order to mitigate any future downturn in economic activity. At the same time, the Government is committed to using receipts from the disposal of assets for public debt reduction.

The budget reflects a recovering economy which will grow by 7.5% in 2018 and a projected 4.2% in 2019. A backdrop to the recovery is that unemployment levels have decreased to c. 5% in 2018.

In keeping with recent trends, the vast majority of changes announced in the budget were disclosed in recent days via various media outlets. As a result, there is little contained within the budget at a first glance that can be described as a shock.

This summary will focus primarily on the main policy changes and provisions presented by Minister Donoghue.

The main features of Budget 2019 as they will affect you are as follows;

  • An increase of €750 in the income tax standard rate band for all earners, from €34,550 to €35,300 for single individuals and from €43,550 to €44,300 for married one earner couples.
  • An increase in the Home Carer Tax Credit from €1,200 to €1,500.
  • An increase in the Earned Income Credit from €1,150 to €1,350.
  • No changes to income tax rates. Income tax rates remain 20% and 40%.
  • Incomes of €13,000 or less are exempt from USC. The USC rate for incomes between €19,874 – €70,044 is to be reduced from 4.75% to 4.5%.
  • The VAT rate for the tourism / hospitality sector has been increased from 9% to 13.5%.
  • No changes in CGT or CAT rates. Modest increase in Group A CAT threshold.
  • Cigarettes to increase by 50c per packet of 20 from 9 October 2017.
  • No change to main Corporation tax rate.
  • State Pension will increase by €5 per week from March 2019 while all other social welfare payments will increase by €5 per week in line with State Pension.
  • The Christmas bonus for social welfare recipients will be restored to 100 per cent of the recipient’s weekly payment.
  • Mortgage Interest relief on loans used to purchase, develop or repair a residential property will be granted at 100% 1 January 2019.

Income Tax and Levies

  • As outlined previously the main change in terms of income tax are the minor reductions targeted at “middle income earners” while the Standard rate income threshold has increased by €750.
  • Changes to the USC will benefit those earning between €19,874 – €70,044 as the rate is to be reduced from 4.75% to 4.5%.
  • For the self-employed the additional surcharge on income in excess of €100,000 appears to remain. However, self-employed individuals will now benefit from an increased earned income credit of €1,350, an increase of €200 from last year’s budget.

Universal Social Charges

USC Rates & Bands from 1 January 2020:

    Incomes of €13,000 are exempt. Otherwise:

  • €0 – €12,012 @ 0.5%
  • €12,012 – €19,874 @ 2%
  • €19,874 – €70,044 @ 4.5%
  • €70,044+ @ 8%
  • Self-employed income over €100,000: 3% surcharge

Tax Bands Amendments

  • €34,550 to €35,300 for single individuals
  • €43,550 to €44,300 for married one earner couples.

Private Business

  • Key Employee Engagement Programme (KEEP)- A share-based remuneration incentive was introduced in last year’s budget. In recognition of the slow take up under the scheme the following changes are proposed:
    o to increase the ceiling on maximum annual market value of shares that may be awarded to equal the amount of the salary (up from 50%);
    o to replace the three-year limit with a lifetime limit; and
    o to increase the quantum of share options that can be granted under the scheme from €250,000 to €300,000.
  • Three Year Start Up Relief provides corporation tax relief for profitmaking start-up companies which create and maintain jobs. The relief is being extended a further three years, until the end of 2021.
  • Employer’s PRSI from 1 January 2019 the weekly income threshold for the higher rate of employer’s PRSI will increase from €376 to €386. This follows a recommendation of the Low Pay Commission to ensure that the increase in the hourly minimum wage does not lead to work disincentives for workers, in particular those seeking to work full-time.
  • A Future Growth Loan Scheme for SMEs and the agriculture and food sector is being launched providing up to €300m.

VAT

  • VAT rate on tourism activities to increase to 13.5%, with the exception of newspapers and sporting facilities. The VAT rate on electronic newspapers will reduce from 23% to 9%.

Property

  • Landlords will also benefit with the news that from January 2019 Mortgage Interest Relief will be accelerated thereby allowing 100% of interest on loans to purchase, develop or repair a residential property against income.

Capital Acquisitions Tax (CAT)

The current Group A tax free threshold which applies primarily to gifts and inheritances from parents to their children is being increased from €310,000 to €320,000.

No changes were announced with regard to the Group B or C Thresholds.

Corporation Tax

The Government has stated its commitment to maintaining the 12.5% Corporation Tax rate.

Customs & Excise

Excise duty on a packet of 20 cigarettes is being increased by 50c with effect from 09 October 2018. No changes to duty on alcohol, petrol or diesel.

There will be an increase in the betting duty on bets placed by customers in the State will provide the additional yield:

  • from 1% to 2% for all bookmakers and
  • from 15% to 25% on the commission earned by betting intermediaries

Pensions

There appears to be no changes announced with respect to private pensions.

Social Welfare Benefits

  • State Pension – increase of €5 per week from March 2019.
  • Social welfare payments – all payments to increase by €5 per week in line with the State Pension
  • Christmas – 100% Christmas bonus for social welfare recipients.

Advice

If you require any clarification on any of the Budget matters please do not hesitate to contact your advisers as follows;

Telephone: 01 491 4132
E-mail: cathal@opeswealthtrust.ie
frank@opeswealthtrust.ie
Website: www.opeswealthtrust.ie
Office: 192-194 Harold’s Cross, Dublin D6W AP86