Minister for Finance, Michael Noonan, TD, last week announced his budget for 2013. While the big ticket items such as new Local Property Tax, additional Excise Duties and the changes to the PRSI allowance had been signalled well in advance, there were still plenty of new items included in the budget. Some of the main points of this budget are now detailed below.
Income Tax rates, credits and bands remain unchanged. The key personal tax measures announced by Minister Noonan concern an increase in the USC rate for individuals aged 70 or over and changes to the tax relief available on charitable donations and termination payments. Importantly, the weekly PRSI allowance is to be abolished with effect from 1st January 2013. While in the case of self employed contributors, the minimum contribution is increased to €500. Unearned income will also become subject to PRSI in 2014. This means that PRSI will be payable on income generated from wealth such as rental income, investment income, dividends and interest on deposits and savings.
Mr Noonan also announced measures that he hopes will support the domestic economy. These include the enhancement of the 3 year relief from Corporation Tax which is currently available for start up companies and an increase to the annual threshold for allowable R&D expenditure to €200,000.The annual turnover threshold for the cash receipts basis of accounting for VAT purposes has also been increased from €1 million to €1.25 million.
Tax rules on pensions are set to be amended to restrict tax relief to pension schemes which deliver income of more than €60,000 per annum. It was also announced that taxpayers will have the facility to make a once-off withdrawal of up to 30% of the value of the pension fund derived from Additional Voluntary Contributions, subject to the marginal rate of tax.
A number of unexpected increases were introduced on some of the capital taxes. These include a 10% decrease in each of the thresholds at which Capital Acquisitions Tax (CAT) applies to gift and inheritance received after 5 December 2012 and a 3% increase in the rates of CAT and Capital Gains Tax taking the rate of each to 33%. While an increase to the rate of Deposit Interest Retention Tax (DIRT) and Exit Taxes was announced. DIRT has increased from 30% to 33%.
Perhaps the change most noted in the media was the introduction of a local property tax. Residential property owners will be liable for this taxed based on the self assessed market value of their property on 1st May 2013. A rate of 0.18% on the first million with the balance above that at 0.25% will apply.
Listed above are just some of the key points of Mr Noonan’s budget for 2013. If you are unsure as to the impact this Budget, has had on your own personal position, please feel free to contact our qualified tax professionals who may be able to assist you in better managing your tax affairs, meeting your compliance obligations and improving your overall tax efficiency in light of yesterday's amendments.