The Irish Budget 2023 – what does it mean for you?
Tax cuts, property measures, VAT, business taxes, one-offs and cost-of-living, agricultural, motor, climate change and more.
Tax Cuts / Personal Tax
The following changes were made to the income tax bands and credits. This will give a single person earning €40k per year an extra €815 in their pocket or €1,630 per couple. This is achieved by:
- Income Tax Band: Increase the 20% tax band by €3,200 (from €36,800 to €40,000 for a single person). This gives everyone earning at least €40,000 an extra €640 per year. There are pro rata increases for couples.
- Tax Credits: The general tax credits will increase from €1,700 to €1,775. This gives most people an extra €150 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
- Home Carer Credit: Will increase by €100.
- Married Couple or Civil Partnership Tax Credit: The married couple or civil partner tax credit will be increased by €150 from €3,400 to €3,550
- USC: An additional €1,625 will be subject to the 0.5% rate as opposed to the 2% rate. This will save the average worker €24 per year and is aimed at taking minimum wage workers out of the higher USC rate.
- Medical card holders will continue to avail of the reduced rate of USC where their income is below €60,000.
- Rent Tax Credit: Renters will be entitled to a rental credit of €500 per year for 2022 onwards. This will be paid on a per person basis and therefore, couples can avail of a €1,000 tax credit.
Property Related Measures
- Vacant Property Tax: A new tax will apply to residential property which is occupied for less than 30 days in a 12 month period.
- Help to buy Scheme: Extended in its current form until the end of 2024 (max €30k).
- Pre-Letting Expense Relief: Improvement to the scheme for landlords. This relief allows a landlord claim a tax deduction for pre-letting expenses of up to €10,000 (previously €5,000) per unit where the premises has been vacant for at least 6 months (previously 12 months) before letting.
- Residential Development – Stamp Duty Refund: Extended to 31 December 2025. The scheme allows for a refund of stamp duty paid on non-residential property when converted into residential property. The refund is from 7.5% to 2%.
- Living City Initiative: Extended to 31 December 2027, and can now be claimed over 7 years as opposed to 10.
- Hospitality Sector (9% Rate) – It was confirmed that the reduced rate will cease on 1 March 2023 and increase back to 13.5% after this date.
- Oil & Gas (9% Rate): Extended to 28 February 2023. This was due to expire 31 October 2022.
- Farmers Flat Rate Scheme: Decrease from 5.5% to 5%.
- Hormone and Nicotine replacement therapies: Reduced to zero rate along with a number of period products which were still at 9%.
- Temporary Business Energy Support Scheme: This is one that will get all the attention. Applies to trading businesses who are tax compliant and have experienced a 50% increase in gas and electricity costs when comparing a billing period in 2022 against the same period in 2021. The support will be 40% of the increase in cost, up to a maximum of €10k per month. Interesting the scheme will need to be approved by the EU commission in advance of any payments being made. Our understanding is that if a business paid €10,000 in energy costs in November 2021 and the bill increased to €16,000 for November 2022, Revenue would cover 40% of the increase (i.e. €2,400).
- Research and Development Tax Credit (R&D): There has been a significant improvement to the R&D tax regime whereby companies can now choose to have the first €25k of any claim refunded in year 1 (as opposed to 3 years) or have the tax credit offset against other tax liabilities.
- Knowledge Development Box (KDB): Extended to 2027. The scheme provides a special 6.25% corporation tax rate on intellectual property developed in Ireland.
- Small Benefit Exemption: The tax free voucher scheme is increased from €500 tax free per employee to €1,000. 2 vouchers can be given in any one year. This will apply from 2022.
- KEEP Scheme: Extended to December 2025.Some decent improvements here including that companies can now buy back KEEP scheme shares. and the lifetime company limit has increased from €3m to €6m.
- Foreign Earnings Deduction (FED): Extended for 3 years to December 2025. The scheme provides relief from income tax for employees in Ireland who travel to developing nations to temporarily carry out duties of employment.
- Special Assignee Relief Programme (SARP): Extended for 3 years to December 2025. Limit for claiming has increased from €75k to €100k. The scheme provides income tax relief for high net worth individuals relocating to Ireland to carry out duties of employment.
One-Off Cost of Living Allowances
- Energy Payments (households): €600 per household paid in 3 instalments of €200 each. This will be paid directly to electricity providers. The first payment will paid before Christmas and two further instalments in the new year.
- Double Social Welfare: Once off double week Cost of living payment for all those in receipt of social welfare. To be paid in October.
- Christmas bonus will still be paid in early December for social welfare recipients.
- Double Child Benefit: Double Child benefit payment to be paid in November.
- Stock Relief: Extended to December 2024.
- Young Trained Farmer Relief (stamp duty): Extended to December 2025.
- Accelerated Capital Allowance Scheme: New scheme to assist with farmers who build energy efficient slurry facilities.
- Farm Consolidation Relief (Stamp Duty): Extended to December 2025.
- Farm Restructuring Relief (CGT): Extended to December 2025.
Motor Tax / Climate Changes
- Carbon Tax: Increase of €7.50 per tonne from €41 to €48.50 per tonne. The increase will take effect for auto fuels from 12th October, with the other fuels from 1 May 2023 after winter heating season.
- National Oil reserves Levy has been abolished – equates to 2c per litre of vehicle fuel. This will offset the increase in carbon tax (see above).
- Concrete Blocks Levy: There will be a new 10% Levy placed on the use of concrete in construction from April 2023. This will assist with payment of the redress scheme.
- Cigarettes: Increased again by 50 cents. A packet of 20 cigarettes is now roughly €15.50.
- 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 up to 25%. This will result in a €175 per month or €2,106 per year paid to parent.
- College Fees: A one-off reduction of €1,000 per college student for 2022/2023 year. There will be a further €500 reduction for families earning under €100k.
- Licence Fee Reduction: 50% cut in the cost for of a special exemption order from €110 to €55. This is to support the night time economy.
- Microbrewery Relief: Production threshold is being increased by 50% to allow microbreweries expand.
- Banking Levy: Extended by 1 year to the end of 2023.
Looking for financial advice on how to make the best of the Budget 2023?
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