In advance of an election year, Budget 2016 was proclaimed as the ‘giveaway budget’. Minister Noonan started off with claiming that Ireland is “well on course” to restoring our sovereignty. The Budget includes €1.5 billion in spending a number of which impacting employees and employers. Peninsula Business Services (Ireland) Limited has created a short synopsis of the key impacts of Budget 2016 and how it can affect your business: Key Issues
- Increase in minimum wage from €8.65 to €9.15 from January 2016.
- Lowering of USC bottom three rates (see below).
- Statutory paternity leave of two weeks to take effect in September 2016.
Income tax
- The entry point to the USC will rise from €12,012 to €13,000 which is said would remove 42,500 workers from the scope of the charge.
- The three lower USC rates are to fall –
- the 1.5 per cent rate (on the first €12,012 earned) will be cut to 1 per cent;
- the 3.5 per cent rate (on income of €12,012 to €18,668) falls to 3 per cent;
- and the 7 per cent rate (on earnings of €18,668 to €70,044) will fall to 5.5 per cent.
- The marginal rate of tax down will fall to a maximum of 49.5 per cent for all people earning under €70,044.
- There will be an Earned Income Tax Credit to the value of €550 for people with earned income, such as the self-employed and farmers, who do not have access to a PAYE credit.
Taxes and Initiatives for Businesses
- The tourism VAT rate is to stay low at 9%; this has been welcomed with relief from the Irish Hotel Federation saying that keeping the rate is of “enormous importance” to the hotel industry.
- There is to be no change to the 12.5% rate of corporation tax however Income that qualifies for the Knowledge Development Box will be subject to a reduced rate of corporation tax of 6.25 per cent.
- An increase of 50 cent on cigarettes with effect from Tuesday Midnight bringing the price to €10.50.
- Owners of commercial vehicles above a certain size will have their motor tax significantly reduced. The maximum rate will be €900 compared to a current top level of €5,195.
- A reduced Capital Gains Tax rate of 20 per cent (rather than 33 per cent) will apply to the disposal in whole or part of a business up to an overall limit of €1 million in chargeable gains.
Social Protection
- Paternity benefit is to be introduced from September 2016. Further details are not known as of yet.
- The old age pension will increase by €3 per week from January.
- Child benefit is to increase by €5 per month to €140 from January.
- The respite care grant for carer’s will be restored to its previous level of €1,700.
- A tax credit for people who are carers in the home rises by €190 to €1,000. The income threshold for home carers also increases.
- The Christmas bonus for social welfare recipients will be restored to 75 per cent of the recipient’s weekly payment. It means a pensioner on €230 will receive a bonus of €173. A dole claimant receiving unemployment benefit of €188 will get a bonus of €141.
- The fuel allowance will be increased by €2.50 per week to €22.50.
- The threshold for the Family Income Support payment is to increase by €5 per week for families with one child and €10 for those with two or more children.
Pensions
- The pension levy of 0.15% is being abolished at the end of 2015.
Childcare
- Free pre-school childcare will be available for children from 3 years until they start primary education or reach the age of five and a half years.
- Extension of the free GP care scheme to children aged under 12 (subject to negotiations).
Job Creation
- Budget to recruit up to 600 extra Gardaí and to improve Garda technology.
- Some 2,200 new teachers will be hired in an effort to reduce the pupil-teacher ratio at primary level from 28:1 to 27:1 and at second level from 19:1 to 18.7:1.
- NAMA is to deliver 20,000 residential units before the end of 2020 with 90 per cent of these to be in the greater Dublin area. This will cost €4.5 billion which Mr Noonan said would be recouped. This will no doubt lead to an increase in jobs in construction and other related industries.
If as an employer you are unsure how this change to illness benefit 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.
