The Government has unveiled a multi-billion-euro Budget 2023 package. Speaking in the Dáil, Minister for Finance Paschal Donohue said this is a “Cost of Living Budget”, focused on helping individuals, families and businesses to deal with rising prices.
We have set out below a summary of the measures announced.
One change that is effective in this tax year that will be of interest for all employees (including Directors) is the change to the small benefit exemption to €1,000 (from €500) and an increase in the number of benefits that an employer can give from one to two per year (subject to an overall annual value of €1,000). This is welcomed and will benefit many retailers and businesses in the run up to Christmas 2022 and beyond. As this change will apply in the current tax year this additional benefit can be paid this year if an employer decides to do so.
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 €3,200 in the income tax standard rate cut-off point for all earners, from €36,800 to €40,000 for single individuals and from €45,800 to €49,000 for married couples / civil partners with one earner.
- An increase of €75 in the Personal Tax Credit from €1,700 to €1,775
- An increase of €75 in the Employee Tax Credit from €1,700 to €1,775
- An increase of €75 in the Earned Income Credit from €1,700 to €1,775
- An increase of €100 in the Home Carer Tax Credit from €1,600 to €1,700
Third Rate of Tax
A policy decision is still to be made by Government but inference that this could be implemented by 2024 once systems are updated.
- An increase of €1,625 to the 2% rate band ceiling from €21,295 to €22,920
- The reduced rate of USC concession for medical card holders is being extended for a further year. 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)
- 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
Foreign Earnings Deduction
Extension of Foreign Earnings Deduction (FED) to 31 December 2025. This provides relief from income tax on up to €35,000 of income for employees tax-resident in Ireland who travel out of the State to temporarily carry out duties of employment in certain qualifying countries.
Key Employee Engagement Programme
Extension of Key Employee Engagement Programme (KEEP) to 31 December 2025, facilitating the buy-back of KEEP shares by the issuing company and increasing the company limit to €6 million.
Special Assignee Relief Programme
Extension of Special Assignee Relief Programme (SARP) to 31 December 2025 and increasing the minimum income limit for new entrants to €100,000 from €75,000. Existing claimants are not affected by the change.
Small Benefit Exemption
An increase in the limit to €1,000 (from €500) and an increase in the number of benefits in a year that an employer can give from one to two per year (to a maximum annual total of €1,000).
The increase in the small benefit exemption to €1,000 and an increase in the number of benefits that an employer can give from one to two per year is welcomed and will benefit many retailers and businesses. This change will apply in the current tax year, so this additional benefits can be paid this year if an employer decides to do so.
VAT rate for gas and electricity
The Minister confirmed that the extension of 9% VAT rate for gas and electricity is due to expire on 28 February 2023. This was due to expire on 31 October 2022.
Electricity credits for all households totalling €600 to be paid in 3 instalments of €200; the first payment will be made before Christmas, with two further instalments in 2023.
Fuel allowance recipients will also receive a lump sum payment of €400 before Christmas.
Business Taxes and Supports
Temporary Business Energy Support Scheme
Section 481 Film Relief
Finance Bill 2022 will extend Section 481 from its current end date of 31 December 2024 to 31 December 2028.
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
Knowledge Development Box (KDB)
Finance Bill 2022 will extend the sunset clause of the KDB for 4 years, to accounting periods commencing before 1 January 2027. The KDB will have a new effective rate of 10%, to come into effect from a date to be set by commencement order.
Application of a zero VAT rate for newspapers and news periodicals, including digital editions
The VAT rate on newspapers and news periodicals will be reduced to zero from 9%. This measure will apply to digital editions of these publications. This change will be introduced from 1 January 2023.
VAT and Hospitality
The Minister confirmed that the 9 per cent VAT rate which is currently in place to support the tourism and hospitality sectors is due to finish on 28 February 2023. Whilst implied that this means the rate would return to a higher rate, this was not explicitly confirmed.
Welfare & Pensions
Social Protection Recipients
- Fuel allowance recipients will also receive a lump sum payment of €400 before Christmas.
- A once-off double week "Cost of Living Support" payment is to be paid to all qualifying social protection recipients in October and will include pensioners, carers, people on disability payments and jobseekers.
- an additional lump payment of [€500] to those in receipt of the Working Family Payment
- Double Child Benefit payment (worth €140 per child in addition to the normal monthly payment) to be made in November
- Payment in November of €500 for those who qualify for the Carer's Support Grant and those who qualify for the Disability Allowance, Invalidity Pension and Blind Pension
- One off payment of €200 to recipients of the Living Alone Allowance
- Application of a zero VAT rate for Automatic External Defibrillators and period products
- Application of a zero VAT rate for all non-oral Hormone Replacement Therapy
- Application of a zero VAT rate for all non-oral Nicotine Replacement Therapy
- all inpatient hospital charges will be abolished
- GP visit cards will be provided to those on or below the median income (340,000 additional people)
- there will be a €2 increase in the weekly rate for a Qualified Child
- the Drug Payment Scheme threshold will remain at the lower rate of €80 in 2023
- funding will be provided to provide access to IVF treatments
- free contraception will be available for all women aged between 16 and 30
Help to Buy
Extension of Help to Buy (HTB) to 31 December 2024
Living City Initiative
Extension of the Living City Initiative (LCI) to 31 December 2027, acceleration of relief for owner-occupiers so that it can be claimed as a deduction from total income of 15% of the total eligible expenditure in each of the first six years and 10% for the seventh year and carry forward of relief for owner occupiers
Pre-letting Expenses for Landlords
Increase eligible expenditure limit for pre-letting expenses for landlords to €10,000 and halve the vacancy period to six months
Rent tax credit
Introduce a new €500 tax credit for private tenants who are not in receipt of other State housing supports. The credit will be claimable “in year” in 2023 and in subsequent years and from early in 2023 in respect of rent paid in 2022
Vacant Homes Tax
A Vacant Homes Tax (VHT) will be introduced in 2023. The tax will apply to residential properties which are occupied for less than thirty days in a twelve month period. The tax will be self assessed and administered by the Revenue Commissioners.
There will be a number of exemptions to ensure property owners are not unfairly charged for temporary
vacancy arising from genuine reasons. This will include properties recently sold or currently listed for sale or rent; properties vacant due to the occupier’s illness or long-term care; and properties vacant as a result of significant refurbishment work.
Further details on this measure is to be included in the Finance Bill.
Extension of Residential Development Stamp Duty Refund
Scheme to end-2025. this is a refund scheme whereby a portion of the stamp duty paid on the acquisition of non-residential land is refunded where that land is subsequently developed for residential purposes.
Defective Concrete products Levy
New levy of 10% on certain concrete products at point of first supply
- funding will be made available to support 8,800 new HAP tenancies and 800 RAS tenancies
- 9,100 new-build social homes, 5,500 new affordable homes for sale and rent and 6,500 new social homes will be supported
- funding to deliver 37,000 home energy upgrades
The Carbon Tax rate will increase from the current rate of €41 to €48.50 per tonne of CO2. This will apply to auto fuels with effect from 12 October 2022 and all other fuels from 1 May 2023. This will mean that there will be an increase of just over two cent VAT inclusive per litre of petrol and diesel.
To offset this carbon tax increase the National Oil Reserves Agency (NORA) levy is being reduced to zero from 2 cent per litre.
- there will be a Free School Book Scheme for primary school pupils from autumn 2023
- over 660 additional mainstream teachers, over 1,190 SNAs and 680 special education teachers will be provided
- the National Childcare Scheme hourly subsidy is to increase from 50c to €1.40
- there will be a €500 increase in post-graduate contribution grant for eligible families
- over 4,800 additional places on craft and consortia-led apprenticeships and 4,000 places on craft apprenticeship programmes will be supported
- once-off reduction in the Student Contribution of €1,000 for eligible students in the 2022-2023 education year
- once-off double monthly payment for those in receipt of the SUSI maintenance grant (income limit to qualify for a 50% reduction in contribution fees under SUSI is being increased from €55,240 to €62,000.
- €1,000 increase to the post graduate tuition fee contribution grant.
Slurry Storage Facilities
Accelerated capital allowances for the construction of slurry storage facilities so that 50% of expenditure is claimed over two years rather than seven years.
Young Trained Farmer (Stamp Duty) Relief
Extension to 31 December 2025
Farm Consolidation (Stamp Duty) Relief
Extension to 31 December 2025
Farm Restructuring (Capital Gains Tax) Relief
Extension to 31 December 2025
Extension of the Young Trained Farmer and Registered Farm Partnerships stock reliefs to 31 December 2024
Flat-rate compensation percentage for Farmers
reduced from 5.5% to 5.0%
- 1,000 new Garda and 430 Garda staff will be provided
Childcare & Parenting
Comments noted that Revenue will conduct a range of targeted projects which will include PAYE compliance interventions involving a further focus on share schemes, and increased debt management activity.
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.
27 September 2022