Minister for Finance, Michael Noonan, delivered Budget 2015 this afternoon, October 14th. As the economic outlook improves, the tone around this budget was different; with less talk of severe cuts and more talk about tax giveaways. Here we take a look at how this budget will impact small businesses and the self employed.
CHANGES IN INCOME TAX
For workers in the PAYE system earning under €70,000 the Budget brought some good news. The Government has decided to decrease income taxes for the first time since 2008. Instead of paying 41% at the higher rate you will now pay 40%. Also, the entry point at which you start paying the higher rate of PAYE tax has been increased by €1,000.
There have been several changes to the way the Universal Social Charge is levied. First of all, the entry point at which the Universal Social Charge (USC) kicks in has been increased to €12,012. The first rate itself has also been reduced from 2% to 1.5%. The second USC rate was also reduced from 4% to 3.5%. For anyone earning over €70,000 however, the news on USC was not positive and will reduce any gain made from PAYE cuts as two new rates of 8% and 11% were introduced for incomes over 70k (PAYE workers and Self Employed) and 100k (Self Employed only).
A new water tax credit has been introduced. This basically means that if you are paying water tax you will now get a new income tax relief of 20% in respect of water charges up to a maximum of €500 per household per year. The Water Charges Relief will be worth up to €100 per household per annum when claimed in the following year.
SMALL BUSINESSES OWNERS
The 9% VAT rate in the tourism sector is to be retained which will be welcomed by restaurants and other businesses.
3 Year Relief for Start-up Companies
Minister Noonan announced an extension to the popular Corporation tax start up relief, for new business set up in 2015. This relief, which was due to expire at the end of 2014, provides an exemption from Corporation tax for start-up companies restricted to the amount of Employers PRSI paid in the year.
A number of measures have been introduced to both help kick start the construction sector and slow down the pace of house price increases. These measures will hopefully in turn generate more jobs in the construction sector for builders, plumbers, electricians, etc.
Home Renovation Incentive
The Home Renovation Incentive is being extended to include rental properties owed by landlords subject to income tax. The incentive provides for tax relief by way of an Income Tax credit at 13.5% of qualifying works carried out on a home by a qualifying Contractor.
DIRT Refund for first time buyers
To provide first time buyers with an incentive to save and get themselves on the property ladder, the Minister has introduced a refund of DIRT on the savings of First Time Buyers.
Minister Noonan introduced a number of measures to address issues such as the increasing number of older farmers and the need to make farming more productive into the future.
Land leasing Income tax scheme
Currently an individual aged 40 years or over, may be entitled to an exemption from income tax on certain income arising from the leasing of farm land. Budget 2015 has made the following changes to the scheme:
- The amount of income exempted has been increased by 50%.
- Farmers operating as a ltd company can also claim the relief.
- The age limit of 40 has been removed.
The controversial pension levy will be abolished by end of 2015, with a reduction to .15pc today. The levy is calculated on the value of a private pension fund, payment of which is met out of the pension fund assets, therefore reducing the value of your pension pot. Now that the levy has been reduced it is a good time to top up your pension in order to reduce your tax bill.
CGT exemption to be abolished
Minister Noonan said he won’t renew the capital gains tax (CGT) relief on properties that have been held for more than seven years in Budget 2015.
Rent a room relief
The amount you can earn before paying any tax when you rent out a room in your home has been increased from a flat €10,000 to €12,000.
Whilst there were no changes to wine, petrol or Diesel the price of a packet of cigarettes was increased by 40cents.