Minister for Finance, Michael Noonan delivered his 5th and perhaps final budget today, Tuesday 13th October 2015. With tax cuts for everyone and some good pro-business incentives this Budget will be welcomed by many.
Here we take a look at the main items affecting small businesses and the self-employed.
New Self-Employed Tax Credit
The government confirmed today that they would close the gap between the self-employed and PAYE workers by introducing a new 'earned income' tax credit. This will be worth €550 from 2016 to all self-employed people and is set to increase over the next few years.
Cuts in the USC
The much maligned USC has been reduced again in this year’s budget. Income of €13,000 or less will now be exempt. The 1.5% rate and the 3.5% have both decreased by .5 of a percentage point and we have also seen changes to the bands. And finally, the 7% band has been cut to 5.5% on income earned between €18,669 and €70,044. These reductions mean that overall the higher rate of tax has come down to 49.5% for workers earning up to €70,044.
As expected, the tax free threshold rate for gifts and inheritance such as the family home has been increased to €280,000. This increase applies on or after the 14th of October 2015. It is hoped this will assist children inheriting the family home and remove the need to sell the property to meet the CAT bill.
Capital Gains Tax
Budget 2016 has also introduced a new relief for entrepreneurs who sell business assets. This essentially cuts the rate of CGT payable on business assets that meet certain criteria (to be further confirmed in the finance bill) to 20% rather than 33%, up to an overall limit of €1 million in chargeable gains. It is hoped this relief will assist in encouraging new entrepreneurs and stimulate the jobs market at the same time.
- The minimum wage has been increased by 50 cents to €9.15 from 1 January 2016.
- The minister introduced a new PRSI relief for low earners with a maximum level of relief of €12 per week. This is something employers will have to implement in 2016 so it will be important to update payroll systems.
- There is an increase in the weekly threshold at which employer’s PRSI rises from the 8.5% to 10.75% on all earnings. Again, it will be important for employers to check they are paying the correct level of employers PRSI.
- FREE YEAR OF EARLY CHILDHOOD CARE: The Government will contribute towards playschool and day-care service costs, for children from the age of 3 until 5 an half years, or when they begin primary school. The change is hoped to assist parents with spiralling childcare costs.
- PARENTAL LEAVE: Fathers will now be entitled to two week’s paternity leave under the new measures, effective September 2016.
- CHILDREN’S ALLOWANCE: As with budget 2015, children’s allowance has increased by another €5 a month to €140.
The Government have announced the continuance of a number of income tax reliefs for farmers which were due to run out at the end of the year, including:
- STOCK RELIEF FOR FARMERS AND PARTNERSHIPS: These reliefs were due to end on 31 December 2015 but have now been extended to 31 December 2018. The relief allows the qualifying farmer to take a deduction for the increase in stock value from their taxable profits.
- STAMP DUTY EXEMPTION FOR YOUNG, TRAINED FARMERS: This relief was due to end on 31 December 2015, but has also been extended to 31 December 2018. This exemption provides for full relief from stamp duty on the transfer of land to young trained farmers who meet certain conditions.
- FARM SUCCESSION: A new farm succession transfer partnership model is being introduced, subject to EU State Aid approval. This will allow family members, to enter into a partnership which makes provision for the transfer of the farm to the younger farmer at the end of a specified period, not exceeding ten years. To support this transfer, an income tax credit worth up to €5,000 per annum for five years will be allocated to the partnership and split accordingly.
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