Budget Summary 2018

The following is a summary of the tax changes announced by the Minister for Finance and Public Expenditure and Reform. Changes are effective from 1st January 2018 unless stated otherwise.

Income Tax

The tax credits and tax bands changes are in bold.

Tax Credit

Tax Credit 2017 € 2018 €
Single Person 1,650 1,650
Married or in a Civil Partnership 3,300 3,300
Employee Tax Credit 1,650 1,650
Earned Income Tax Credit Max 950 1,150
Widowed Person or Surviving Civil Partner (without qualifying child) 2,190 2,190
Single Person Child Carer Tax Credit 1,650 1,650
Incapacitated Child Credit Max 3,300 3,300
Blind Tax Credit: Single Person

Married or in a Civil Partnership – One Spouse or Civil Partner Blind Married or in a Civil Partnership – Both Spouses or Civil Partners Blind

 

1,650

 

1,650

 

3,300

 

1,650

 

1,650

 

3,300

Widowed Parent: Bereaved in 2017

Bereaved in 2016

Bereaved in 2015

Bereaved in 2014

Bereaved in 2013

Bereaved in 2012

 

–   3,600

3,150

2,700

2,250

1,800

 

3,600

3,150

2,700

2,250

1,800

Age Tax Credit:

Single or Widowed or Surviving Civil Partner

Married or in a Civil Partnership

 

245

490

 

245

490

Dependent Relative 70 70
Home Carer Tax Credit 1,100 1,200

 

Personal Circumstances 2017 € 2018 €
Single or Widowed or Surviving Civil Partner, without qualifying child  

33,800 @ 20%

Balance @ 40%

 

34,550 @ 20%

Balance @ 40%

Single or Widowed or Surviving Civil Partner, qualifying for Single Person Child

Carer Credit

 

37,800 @ 20%

Balance @ 40%

 

38,550 @ 20%

Balance @ 40%

Married or in a Civil Partnership, one Spouse or Civil Partner with Income  

42,800 @ 20%

Balance @ 40%

 

43,550 @ 20%

Balance @ 40%

Married or in a Civil Partnership, both Spouses or Civil Partners with Income 42,800 @ 20%

with increase of 24,800 max.

Balance @ 40%

43,550 @ 20%

with increase of

25,550 max.

Balance @ 40%

 

Tax Rates and Tax Bands                                                                                   

 The exemption limits for persons aged 65 years and over remain unchanged:

Personal Circumstances 2017 € 2018 €
Single or Widowed or a Surviving Civil

Partner, 65 years of age & over

 

18,000

 

18,000

Married or in a Civil Partnership, 65 years of age &

over

 

36,000

 

36,000

The above exemption limits are increased by €575 for

each of the first two dependent children and by €830 for the third and subsequent children.

Marginal Relief may apply, subject to an income limit of twice the relevant exemption limit.

Mortgage Interest Relief

Relief is extended to existing recipients for a further three years on a tapered basis. Qualifying interest applies for each of the three years at the following rates:

2017 2018 2019 2020
Qualifying Interest 100% 75% 50% 25%

The interest ceilings are also reduced for each of the three years as follows

First time buyers
2017 € 2018 € 2019 € 2020 €
Single (unmarried or not in a civil partnership) 10,000 7,500 5,000 2,500
Married, in a civil partnership, widowed, or a surviving

civil partner

20,000 15,000 10,000 5,000
Non-first time buyers
2017 € 2018 € 2019 € 2020 €
Single (unmarried or not in a civil partnership) 3,000 2,250 1,500 750
Married, in a civil partnership, widowed, or a surviving

civil partner

6,000 4,500 3,000 1,500

No relief will be available from 1 January 2021.

 

Key Employment Engagement Programme (KEEP)

 A new share option scheme will be introduced for employees of unquoted Small and Medium Enterprises with effect from 1st January 2018, subject to EU approval. Under this new scheme, any gain realised on the exercise of a qualifying share option, granted in the period

1st January 2018 to 31st December 2023, will be exempt from Income Tax, USC and PRSI, provided certain conditions are met.

Any gain on the subsequent disposal of the shares acquired under KEEP will be subject to Capital Gains Tax (CGT) in the normal way.

Pre-letting Expenses – Rented Residential Property

A new deduction is being introduced for pre-letting expenses of a revenue nature incurred on a property that has been vacant for a period of 12 months or more. The expenditure must be incurred within the 12 -month period before it is let as a rented residential premises.

A cap on allowable expenses of €5,000 per property will apply, and the relief will be subject to claw back if the property is withdrawn from the rental market within four years. The relief will be available for qualifying expenses incurred up to the end of 2021.

Universal Social Charge (USC)

 

Standard Rates of USC

USC Thresholds
2017 Rate 2018 Rate
Income up to

€12,012

0.5% Income up to

€12,012

0.5%
Income from

€12,012 to

€18,772

 

2.5%

Income from

€12,012 to

€19,372

 

2%

Income from

€18,772 to

€70,044

 

5%

Income from

€19,372 to

€70,044

 

4.75%

Income above

€70,044

8% Income above

€70,044

8%

 Reduced Rates of USC

USC Thresholds
Individuals aged 70 years or over whose aggregate income for the year is €60,000 or less.

 

Individuals (aged under 70) who hold a full medical card whose aggregate income for the year is €60,000 or less.

2017 Rate 2018 Rate
Income up to

€12,012

0.5% Income up to

€12,012

0.5%
Income above

€12,012

2.5% Income above

€12,012

2%

 Note 1. ‘Aggregate’ income for USC purposes does not include payments from the Dept. of Employment Affairs and Social Protection.

Note 2. A ‘GP only’ card is not considered a full medical card for USC purposes.

Exempt Categories remain unchanged.

2017 2018
Where an individual’s income for a year does not exceed €13,000 Where an individual’s income for a year does not exceed €13,000
All Dept. of Employment Affairs and Social Protection payments All Dept. of Employment Affairs and Social Protection payments
Income already subjected to DIRT Income already subjected to DIRT

3% Surcharge (non-PAYE income)

The surcharge of 3% on individuals who have non-PAYE income that exceeds €100,000 in a year remains unchanged.

 PRSI Contribution Rates

PRSI A1 S1 B1
Employee 4.0% 4.0% 0.9%*
Employer 10.75% Nil 2.01%
  • B1 employee rate increases to 4% for income > €1,443 per week.

Value Added Tax (VAT)

Sunbed Services

The VAT rate on sunbed services will be increased from 13.5% to 23% with effect from 1 January 2018.

Charities

A compensation scheme is being introduced for charities which are unable to reclaim VAT on inputs. A capped amount will apply to the scheme, with pro-rata payments made where the amount claimed exceeds the amount available. Details of the scheme will be made available when complete.

Corporation Tax (CT)

Accelerated capital allowances for energy-efficient equipment

The accelerated capital allowances scheme for energy- efficient equipment is being extended for a further three years until 31st December 2020.

Capital allowances for intangible assets

A cap of 80% will apply in respect of the amount of capital allowances for an intangible asset, and any related interest expense, that may be deducted from relevant trading income arising from the intangible asset in an accounting period.

The cap applies in respect of expenditure incurred on intangible assets on or after 11th October 2017.

Details will be included in the Finance Bill.

Excise

 Sugar Sweetened Drinks Tax (SSDT)

Subject to formal approval by the European Commission, the SSDT will be introduced, in April 2018. It will apply to first supplies in the State of water and juice based drinks with added sugar and a total sugar content of 5g or more per 100 millilitres.

Sugar content

(per 100 millilitres)

Rate
between 5g and 8g 20 c per litre
8g or more 30 c per litre

Drinks supplied in concentrated form will be assessed on the basis of the sugar content of the drink at the dilution level intended for consumption.

Capital Gains Tax (CGT)

CGT incentive for land and buildings held for minimum period of seven years

An amendment will be made to section 604A of the Taxes Consolidation Act 1997.

The amendment will provide that gains in respect of land or buildings that were acquired between 7 December 2011 and 31 December 2014 will be exempt from CGT if they are sold after four years and within seven years from the date they were acquired.

Capital Acquisitions Tax (CAT) / CGT

Leasing of agricultural land for solar energy production – CAT agricultural relief and CGT retirement relief

Amendments will be made to CAT agricultural relief and CGT retirement relief so that the leasing of agricultural land for the production of solar energy will not affect entitlement to the reliefs, where the area of the land which is leased for that purpose does not exceed 50% of the total area of the land concerned.

Further details will be included in the Finance Bill.

Exempt Class Thresholds

Despite expectations that the CAT thresholds would be increased, no change was announced in the Budget, so therefore the current thresholds will apply unchanged for 2018:

Threshold

Class

Applies to Threshold
A Children inheriting

from parent

€310,000
B Inheriting from other

blood relatives

€32,500
C Inheriting from

strangers

€16,250

The CAT rate stays the same at 33%.

Stamp Duty

 Transfer or conveyances of non-residential property

The stamp duty on the purchase or transfer of non- residential property (including land) is increased from 2% to 6%. The new rate takes effect for conveyances or transfers of such property that are executed on or after

11 October 2017. Stamp duty is payable by the purchaser.

A stamp duty refund scheme will be introduced in relation to commercial land purchased for the development of housing. Developers will need to have commenced the relevant development within 30 months of the land purchase to qualify for the refund.

Consanguinity relief and agricultural property

The consanguinity (blood relative) rate of stamp duty was due to expire on 31 December 2017 but is to be extended for another three years. On or after 11 October 2017, it is to be charged at 1% of the consideration instead of being set at half the rate of stamp duty that applies to non-residential property. This means that the amount of stamp duty payable will remain unchanged.

This relief applies to transfers of agricultural property between certain blood relatives where the transferee is a young trained farmer who intends to farm the land or lease the land to someone who farms the land for a period of six years.

Benefit in Kind – electric cars & vans

From 1st January 2018 to 31st December 2018, where an employer provides an employee or director with an electric car or van, no taxable benefit will arise for them.

This exemption is limited to cars or vans which derive their motive power solely from electricity (no exemption is available in respect of hybrid cars or vans).

DIRT

Last year’s Budget provided for a phased reduction in the DIRT rate from 41% in 2016 to 33% by 2020:

DIRT Rates

2016    2017       2018       2019       2020

41%     39%        37%        35%        33%

In 2018 the DIRT rate will therefore fall to 37%.

Exit tax

The Budget speech made no mention of a reduction in the exit tax rate from its current 41%.

Social Welfare

State Pension increases by €5 pw from end March 2018

There is a general €5 pw increase to all Social Welfare pensions, including the State Pensions (Contributory and Non-Contributory) from the end of March 2018.

The new maximum State Pension (Contributory) from March 2018 will be €243.30 pw, or €12,695 pa.

Pensions

The Minister made no reference to changes in private pension tax reliefs or taxation of benefits despite significant discussions in recent weeks.

Income Tax Relief on Personal Contributions

 

Age attained during year

% of Net Relevant Earnings (max

€115,000)

Less than 30 15%
30 – 39 20%
40 – 49 25%
50 – 54 30%*
55 – 59 35%
60 and over 40%
  • The 30% limit above also applies to certain professional sportspeople (e.g. professional golfers) under 50 in relation to their income from their sports occupation.

Finance Bill 2017

The Finance Bill will be published on 19th October 2017.

 

 

The Importance of Waypoints on our Journey

Preparing for the Voyage

From September to December every year, yachtsmen gather in the Canary Islands, awaiting the right trade winds, allowing them to begin their epic voyage across the Atlantic.

Destination; The islands of the Caribbean.

As the crew are busily stocking the yachts with supplies to last them on their three-week voyage, the skipper concentrates on the passage plan. Equipped with compass, dividers and chart plotter, he or she is responsible for ensuring they reach their goal – the islands of the Caribbean. The best course is carefully planned.

Waypoints

Along the chartered route, at various intervals, the skipper inserts essential reference points called Waypoints. These markers ensure the yacht is still on course to reach its destination and act as strategic points that direct it around navigational dangers.

Waypoints avert surprises and ensure the crew don’t wait until day 21 to discover that there is no land in sight.

With the sails set, and the trade winds from the east, crews set sail on their 2,700 nautical mile journey. All things going well, they should reach the Caribbean in about 21 days without any adjustment to their course.

However, the probability is they will encounter unforeseen events of some kind along the way; equipment may break or an Atlantic storm may blow up. Either way, the yacht may drift off course. The chart plotter will clearly show the error of the course. The Waypoint will identify just how far off course they have gone, and the skipper and crew will re-evaluate the course, and make the necessary adjustments.

Knowing your Destinations

Life is just like this. Our starting point is where we are now, and our destination is where we want to be in five, ten or twenty years time. But, we can’t know our destination unless we recognise what exactly are our goals, dreams and aspirations. Once we have done a certain amount of soul-searching, and established what it is we want out of life, and when, then we can set about planning our life journey. But, we also need Waypoints; points along the way where we stop and take stock to ensure we are on track.

Case Study

What surprises me most in my role as Financial Planner is when I ask a client what these goals are, very often they don’t know the answer. In the case of a married couple, though they may be blissfully happily married, they are surprised to discover that they each want different things.  That’s ok, if both know and can plan for their goals.

Take for example a couple we recently met, let’s call them Joan and Martin. Both are in their 50’s, and together for nearly 15 years. Joan runs her own business and Martin is in the medical sector. They asked to meet us to discuss how best to invest €200,000 Martin had recently inherited from his parents’ estate.

Their first question to us was “Where should we invest?”.  They expected us to launch into a spiel on the different investment products they should consider, and were more than a little surprised to be asked instead “What goals in your life would you love this money help you achieve?
There was a long pause while each looked to the other. It transpired Joan actually wanted to expand her business with a long term view. Martin wanted to move to a house closer to the city, and was quite definite about retiring in the next five years.

Happily, through our comprehensive financial planning process, we examined their goals in greater detail, and prepared with them a comprehensive cash flow, tax ,retirement and investment strategy.
We helped then to devise their plan, provided a route to follow and they are now on track to achieve their combined individual goals. A review every year will ensure that they stay on track .
Their plan is not a rigid strait jacket but rather it has been designed to achieve their goals whilst ensuring they can maintain the lifestyle that they want in the meantime.

Life is not a dress rehearsal and whilst achieving their future goals is important to them, so too is enjoying the journey life has ahead of them.

Life is a Journey

So, what makes you happy? Where do you want to be in 10 years’ time? How is money important to you?  Are you an entrepreneur itching to set up your own business? Or are you wasting time counting down the years to your retirement? Have you a dream of buying that house by the sea? Or an ambition to go back to university to get the degree you never go the opportunity to complete? The list is endless, but it is YOUR list.

To go through life without identifying your goals could be compared to a yacht drifting aimlessly in the ocean.

The Importance of Waypoint Financial Planning to Your Journey

At Waypoint Financial Planning we are uniquely positioned to help you identify and achieve your goals, while you get on with your life. We have the blend of professional skills to offer a personal approach and bespoke solutions.  All our advisers are Certified Financial Planners with experience in taxation, business consultancy, investing, retirement planning and banking.

Your job is to decide upon your goals; our job will be to help you achieve them while enjoying life along the way.

Why is Grandad in Australia ? – Nursing Home Care – the mortgage of the future

Modern life is full of stresses and pressures but did you ever think that living too long could be one of them?

In the early part of the 20th century it would have been unusual for a person to live beyond their middle 50’s. (In 1910 the average life expectancy at birth was 54 years).

Now, as a result of improvements in infant care, immunisation, diet, health care and other scientific developments our life expectancy is increasing at the rate of 3.5 years in every 10. Within the next 50 years living to be 100 will be the norm.

So are we ready for this?

Hardly! We haven’t begun to consider or examine the potential implications whether social, economic or financial around living longer. One of the undoubted and obvious risks is the financial cost of living longer both for ourselves and our families but particularly where we need to enter some form of nursing home care.

Nursing home care is already costly with the Ombudsman reporting in November 2010 that some 23,000 of our over 65’s needed some form of long term nursing home care, representing 5% of that group. A subsequent report in October 2012 by Cardi estimated that an extra 2,833 people would need to avail of this care every year.

That’s a NET increase of c. 12% each year in the numbers needing long term nursing home care. And why are the figures not relatively static – well as any talking meerkat will tell you…”SIMPLES”. We’re all just living longer so it’s a natural consequence of longevity.

With an average annual cost of €55,000 per person each year, the current cost of Nursing Home care is c. €1.4 billion each year and is equivalent to 9% of the current health budget! And growing…… If you have a spare €½ million you could pay for yourself but what about your partner, or your Mum or your Dad and what about your Partner’s Mum or Dad? Now we’re up to €3million assuming nil medical inflation and they all only live for 10 years in need of nursing home care! Even if you’re receiving a Ministerial pension you’d find that difficult to manage!

So who’s going to pay this €1.4bn plus every year? At the moment the State subsidises the cost of nursing home care through direct subvention (for those who have inadequate income or means it meets 100% of the cost) or through a combination of direct supports and tax reliefs where the person and/or their family pay a part of the ongoing costs.

One such support comes in the form of the “Fair Deal Scheme” or to give it its correct title the Nursing Home Support Scheme. Under the “Fair Deal Scheme”, you’ve to give up 80% of your annual income and 7.5% of all assets every year while residing in a HSE approved Nursing Home. In return for this the State will (assuming you meet the care assessment and medical criteria) meet the balance of any cost.
Where you’re family home is one of the assets involved then the total annual contribution is capped at 3 years x 7.5% or a total of 22.5% of the value of your home.
The State also gives income tax relief on the costs we bear on certain health care. At the moment income tax relief is granted for the employment of a carer (limit is €50,000 each year) in a home setting or income tax relief at up to 41% in relation to nursing home costs we bear directly.

But with increasing numbers needing to avail of nursing home care and the high costs involves how much longer can we as a State continue to fund the NHSS and tax reliefs at their current levels?

Well if we have a reliable and broadly based tax base, then perhaps we could fund a scheme to meet the needs of a group of people who we’ve an obligation to look after and care for properly.

How do we build that base if approx. 22,000 of our young educated qualified people are emigrating to Australia and elsewhere each year thus rendering a substantial portion of our future tax base resident on the other side of the world? Unless we can retain these people or attract others to the country, our future demographic will be top heavy with dependant people with expensive healthcare needs.

There’s no philanthropic force out there writing cheques for nursing home or other health care costs. It’s the State – you and me, our children and grand-children who’ll have to pay this bill. So let’s start planning for the future rather than just arriving there.

After all there are now 3 certainties in life death, living longer and taxes….. Oh and by the way would anyone of tax paying age leaving the country please bring Granny and Granddad with you.

.