Budget 2019

The Minister presented his second Budget and reported that our economy is again growing strongly and sustainably which is enabling the Government to invest record levels of funding into our key public services, including health and education.  He also reported that this Government is working hard to deliver sufficient housing to provide secure and affordable homes for all our people.

A clear priority of this year’s Budget is about increasing housing supply. While definitely a step in the right direction, only time will tell if this year’s measures finally mean that our housing crisis has been solved.

The government has put in place further measures to plan for Brexit and support businesses and SMEs.

The tourism sector had a substantial change in that, as expected, the VAT rate has increased from 9% to 13.5% . To help boost the tourism sector the Minister announced that he is allocating €35 million to provide targeted supports to the Department of Transport, Tourism and Sport including €4.5 million for regional initiatives such as Ireland’s Hidden Heartlands and the Wild Atlantic Way, and nearly €10 million for the further development of our greenways.

Click here to Download Budget 2019 Summary PDF

INCOME TAX REFORM

• Income tax rates and bands

There have been no changes to income tax rates. The 20% band is increasing by €750 per annum from €34,550 to €35,300 for single individuals and from €43,550 to €44,300 for married one earner couples.

• Earned Income Credit

The Earned Income Tax Credit for self-employed workers is being increased by €200 bringing it to €1,350.

• Home Carer Credit

The Home Carer Credit is increased by €300 to €1,500 per year.

• Minimum wage is increasing by 25 cent to €9.80
   
• A new paid parental leave scheme will be introduced in November 2019 to provide two extra weeks’ leave to every parent of a child in their first year. It is the government’s intention to increase this to seven extra weeks over time.

UNIVERSAL SOCIAL CHARGE

• The ceiling of the second USC rate band will be increased by €502 from €19,372 to €19,874.
• The 4.75% rate is reduced to 4.5%

EMPLOYER PRSI

The weekly threshold for the higher rate of employer’s PRSI will be increased from €376 to €386 to ensure that there is no incentive to reduce working hours for a full-time minimum wage worker.

Increase in employer contribution to National Training Fund levy

From 1 January 2019 there will be a 0.1% increase (from 0.8% to 0.9%) in the National Training Fund levy payable by employers in respect of reckonable earnings of employees in Class A and Class H employments.

CORPORATION TAX

• Rate of Corporation Tax

The Minister has stated once again that Ireland’s 12.5% corporation tax rate on trading income will not be changed.

• Three Year Start Up Relief

The Three Year Start Up Relief which provides corporation tax relief for start-up companies which create and maintain jobs is being extended a further three years, until the end of 2021

• Accelerated Capital Allowances for Employer-Provided Fitness and Childcare Facilities

This measure, introduced in Finance Act 2017, is being amended and commenced with effect from 1 January 2019. Its purpose is to incentivise employers to provide fitness and/or childcare facilities for the use of their employees, by providing an accelerated deduction for the capital investment costs incurred.  

VAT

The 9% VAT rate for the tourism and services sector is increasing to 13.5%. This will impact hotels, restaurants, cinemas, theatres, hairdressers, art galleries.

The VAT rate for newspapers and sporting facilities remains at 9%.

VAT rate on electronically supplied publications is being reduced from 23% to 9% with effect from 1 January 2019. This follows recent agreement among EU Finance Ministers to allow Member States apply reduced VAT rates on digital publications.

CAPITAL ACQUISITIONS TAX

Increase Group A threshold from €310,000 to €320,000 – this is the rate which broadly applies to gifts and inheritances from parents to their children.  This increase applies in respect of gifts or inheritances received on or after the 10th of October.

SUPPORTING BUSINESSES & SMEs

SMEs provide most of our employment and additional Government support for this sector is crucial in light of Brexit.

The Minister announced the launch of a Future Growth Loan Scheme for SMEs and the agriculture and food sector which will provide up to €300 million. This builds on the €300 million invested through the Brexit Loan Scheme last year and forms an important part of the Government’s Brexit response.

Also,over €110 million for Brexit measures across a number of Departments, including funding for essential customs requirements and a range of other targeted measures. As part of the National Development Plan, the Minister has established a Disruptive Technologies Innovation Fund, which makes €500 million available for co-funded projects involving enterprise and research partners over the period to 2027.

KEY EMPLOYEE ENGAGEMENT PROGRAMME (KEEP)

KEEP was announced last year to help SME’s to attract and retain employees in our highly competitive labour market.  A share-based remuneration incentive to facilitate the use of share-based remuneration by unquoted SME companies to attract key employees. Gains arising to employees on the exercise of KEEP share options will be liable to Capital Gains Tax on disposal of the shares, in place of the current liability to income tax, USC and PRSI on exercise. This incentive is available for qualifying share options granted between 1 January 2018 and 31 December 2023.

Three new measures were announced today:

• to increase the ceiling on the maximum annual market value of shares that may be granted to 100% of salary (up from 50%);
• to replace the three-year limit with a lifetime limit; and
• to increase the quantum of share options that can be granted under the scheme from €250,000 to €300,000.

SPORT

The Government are committing €126 million investment across a range of sporting initiatives next year which is in line with promise to double our investment in this area. There will be over €41 million in 2019 for investment in sports projects, which will benefit clubs and organisations in every county in Ireland. The 9 per cent VAT rate is also being retained for sporting facilities.

CIGARETTES

An increase of 50 cent on a packet of cigarettes; this will bring the price of cigarettes in the most popular price category to €12.70.

Contact Imelda Prendergast Director OSK for all your comments and queries in relation to Budget 2019.