2019 Budget Summary

Details of the 2019 Budget were announced in Dáil Éireann on Tuesday 9th October 2018, below is a summary of the main changes in the 2019 Budget which may have implications for you

Small Reductions in Income Tax and USC:

  • No changes in Income Tax rates and the main tax credits and allowances
  • No changes in pension tax relief

There are a number of income tax changes applying in 2019:

  • The standard rate band for single people will be increased by €750 and by €1500 for married couples with two incomes.
  • For higher rate taxpayers the increase will lead to a maximum tax saving of €150 a year or €300 a year for a married couple with two incomes

Standard Rate Income Tax Bands

 20182019
Single Person€34,550€35,300
Married couple, one income€43,550€44,300
Married couple, two incomes€69,100, transferable between spouses to a maximum of €43,500€70,600, transferable between spouses to a maximum of €44,300
  • The Earned Income tax credit provided to the self employed and proprietary directors as an alternative to the PAYE tax credit which they can not claim will be increased by €200 to €1,350. This will mean a tax saving of €200 a year for most self employed and proprietary directors
  • The home carer tax credit will be increased to €1,500. This credit can be claimed by a married couple who are jointly assessed for income tax where one spouse works in the home caring for a dependent person e.g. a child

Income Tax Credits

 20182019
Earned income credit€1,150€1,350
Home carer tax credit€1,200€1,500

The USC rates and bands will be adjusted in 2019 in two ways:

  • The income band to which the 2% rate applies will be increased by €502
  • The current 4.75% USC will be reduced by 0.25%

USC Rates and Bands

 2018 2019
First €12,0120.5%First €12,0120.5%
Next €7,3602.0%Next €7,8622.0%
Next €50,6724.75%Next €50,1704.5%
Balance 8.00%Balance 8.00%
  • The self employed 3% surcharge on incomes over €100,000 continues to apply
  • For those with income (excluding the State Pension and other Social Welfare benefits) of more than €70,044 the budget change will mean a USC saving in 2019 of €139 per annum. There will be smaller USC savings for those on lower incomes.

 

Minor Increase in the Child CAT Threshold

  • The CAT Threshold which applies to benefits taken by children from parents has been increased by €10,000 to €320,000 with effect from 10th October 2018
  • There is no change in the other thresholds or in the CAT rate of 33%.

 

No Change in Capital Gains Tax

  • Apart from a special deal for buy to let investors, there is no change in the Capital Gains Tax rate of 33%

 

DIRT Reduces Again but No Change in Exit Tax

  • The DIRT rate is being reduced in stages from 41% in 2016 to 33% by 2020
  • This means the DIRT rate in 2019 will reduce from the current 37% to 35%, and in 2020 will reduce again to 33%

 

Good News for Buy to Let Investors

  • From 2019 buy to let investors will be able to offset 100% of their mortgage interest against rental income for tax purposes up from the current 85%
  • This will mean a reduced tax liability for most landlords with mortgages on their properties

 

State Pension Increase will Unlock Some AMRFs

  • The maximum rate of State Pension Contributory will increase by €5 per week from €243.30 per week to €248.30 per week from March 2019, or €12,912 per year
  • The Christmas Bonus from the State Pension will increase to 100% in December 2018 from its previous 85% level. In June 2018 the Revenue confirmed that the State Pension Christmas Bonus could, once received, be counted as income fro the purposes of the €12,700 specified income test to avoid having to invest €63,500 of retirement funds in an AMRF or annuity or to unlock an AMRF already held
  • Because no change was announced in the AMRF amount or specified income test of €12,700, the Budget changes in relation to the State Pension will impact on retirees with DC benefits as follows
Already in receipt of the State Pension (Contributory) at the maximum rate of €243.30 p/w and holding an AMRF Their AMRF will automatically convert to an ARF when they get their 100% State Pension Christmas bonus in early December 2018
Holding an AMRF but under the State Pension Age No Immediate change. Their AMRF will automatically convert to an ARF when they start to receive the State Pension (including the Christmas bonus) of at least €239.60 per week
A new retiree under the State Pension AgeNo immediate change. They must still invest €63,500 in an AMRF or annuity at the point of taking their DC benefits, if not then in receipt of pension income of at least €12,700 per year. However, their AMRF will automatically convert to an ARF when they start to receive the State Pension (including the Christmas bonus) of at least €239.60 per week

 

Increase in Employer’s PRSI Rates

  • Because of a 0.1% increase in the National Training Fund Levy (which is collected with PRSI) the employer’s PRSI Class A rate will increase from its current 10.85% to 10.95% in 2019, for employees earning more than €386 per week
  • For lower earners, the employer’s PRSI Class A rate will increase from 8.6% to 8.7% in 2019
  • The employer PRSI Class A rate will increase again by another 0.1% in 2020 to 11.05% for those earning over €386 per week and to 8.8% fir lower earners

 

Further Changes Could Happen in the Finance Bill

The Finance Bill which will implement the Budget changes will be published within 10 days or so. It’s possible that other taxation changes not announced in the Budget could be introduced at that stage

 

Read the Budget in full here

 

If there is anything you would like to discuss, please click Request a Callback or Contact us at the top of this page, or click here

Thanks for reading,

Karen

 

 

 

Karen Cantwell, 12.10.2018 | Posted in News