Budget 2015: The Impact on Employers

The Budget affects everyone and there is no escaping from it. However, the vast majority of employers are not concerned with discussions on the duty on a 20-pack of cigarettes increasing by €0.40c. Therefore, Peninsula Ireland has put together this short synopsis of the Budget and its impact on ‘employers’.

Key Aspects for Employers

• The standard rate of tax is unchanged at 20%.
• The rate of income tax has been reduced by 1%, from 41% to 40%.
• The higher rate of tax threshold has increased by €1000, from €32,800 to €33,800 for single persons, and from €41,800 to €42,800 for married one earner couples.
• Universal Social Charge (USC) basic exemption level rises from €10,036 to €12,012.
• Earners over €70,000 will still be taxed at 52%, inclusive of USC and PRSI.
• Corporation Tax Rate to remain at 12.5%.
• The redundancy rebate has not returned and as such employers cannot claim rebates on any redundancy payments made.
• The pension levy of 0.6% will be removed by the end of 2014 and the 0.15% additional levy will be removed in 2015.
• The 3 year start up relief which applies to new companies will be extended by one additional year to the end of 2015.
• The limits under the Employment and Investment Incentive Scheme, which allows for a deduction from investors on investments in business shares, have been increased to €5million per annum and €15million for the lifetime of investment.

VAT Rates

• The VAT rate will remain at 9% for the tourism and hospitality industry.
• VAT top rate remain at 23%.
• VAT reduced rate will remain at 13.5%.
• Reduction in VAT from 13.5% to 9% for construction related activities.
• Universal Social Charge (USC) basic exemption level rises from €4,000 to €10,036.
• Where cross-border services for telecommunications, broadcasting, or electronics occurs, the VAT will be charged against the EU Member State where the consumer resides, and not the supplies Member State.
• The VAT rate will increase from 5% to 5.2% from January 2015.
• The extension of duties on betting to remote bookmakers and exchanges will take effect from January 2015.

Personal Tax

• Single Persons: all earnings below €33,800 will be at the standard rate of tax (20%) and also earnings from €33,800 will be at the higher rate of tax (40%).
• Married one earner couples: all earnings below €42,800 will be at the standard rate of tax (20%) and also earnings from €42,800 will be at the higher rate of tax (40%).
• PRSI rates remain unchanged at 4% for employees and self-employed.
• PRSI rates remain unchanged at 10.75% for employers with the rate being 8.5% for employee earnings up to €356 per week.
• Universal Social Charge (USC) basic exemption level rises from €10,036 to €12,012. This is a further positive improvement considering that the USC applied to earnings above €4,004 just a few years ago. The USC bands are now as follows:

Corporate Tax

• Corporation Tax Rate to remain at 12.5%.
• In respect of the 25% R&D Tax Credit, the base year limitation on qualifying R&D spend will be removed from January 2015.
• All Irish incorporated companies will be Irish tax resident from January 2015 (for new companies) and 2021 (for existing companies).

Construction Sector

• The Budget has sought to greatly strengthen and develop the Irish construction industry.
• The windfall gains tax of 80% is to be abolished with such profits being taxed at standard Capital Gains Tax of 35% from January 2015.
• The Budget outlined a commitment to construct more than 10,000 social houses by 2019.
• The Home Renovation Incentive, which currently provides tax credits to homeowners who carry out home renovations, will be extended to landlords of rental properties. There will be a limit on expenditure of €30,000.

Indirect Taxes

• The duty on a packet of cigarettes will increase by €0.40c as of 15 October 2014.
• There will be no change to the duty rates on alcohol products.
• There will be no increase in the duty rates on diesel or petrol or home heating oil.

If as an employer you are unsure how these changes will impact your business, please do not hesitate to contact Peninsula on 0818 923 923 and one of our experienced advisors will be happy to assist.