The Minister for Finance Michael McGrath T.D. delivered Budget 2024 today highlighting that the twin objectives to “balance the needs of our society today, while ensuring the well being of our economy for generations to come”. The Minister highlighted the positive backdrop to the budget including a country of full employment, falling national debt, and budget surpluses. He did however flag the unprecedented challenges facing the country including Brexit, the pandemic, the war in Ukraine and the rates of inflation unseen for forty years as well as the fact that our key export markets are facing economic slowdown.

For many households the impact of inflation has led to a reduction in real spending power and a decline in living standards and this was very much to the front of the Minister’s mind in framing this Budget. Whilst there was pressure to spend given the level of the surplus, the Minister rightly raised a note of caution, given the recent reduction in corporate tax receipts as against forecast.

As regards some of the specific taxation measures introduced in the Budget, a summary is as follows:

Personal Taxes

• Income tax standard rate band to increase by €2,000 from €40,000 to €42,000
• Increase of €100 in each of the personal tax, earned income and PAYE tax credit , in the Home Carer Tax Credit, the single person child carer credit and €200 in the incapacitated child tax credit
• Increase in the ceiling for the lower 2% rate of USC by €2,840
• Reduction in the higher rate from 4.5% to 4% from 1 January 2024

Entrepreneurs and Business

• CGT relief for angel investors who may not currently qualify for the revised entrepreneur relief up to a maximum gain of twice their initial investment
• From 1 January 2025, the upper age limit for enhanced retirement relief increased from 65 to 69.
• From 1 January 2025 new limit of €10m on the retirement relief available for disposals to a child up until 70
• R&D Tax Credit increased from 25% to 30% and increase in the year one payment from €25,000 to €50,000
• Key Employee Engagement Programme (KEEP) is to be extended until 31 December 2025 and to be expanded
• Increase in the cap on projects for S481 tax credit from €70m to €125m
• The holding period for EIIS standardised to 4 years allowing a maximum claim of €500k
• Legislation to implement the 15% minimum effective corporate tax rate for large companies in accordance with the OECD Pillar 2 agreement to be included in the Finance Bill
• Participation exemption for foreign sourced dividends to be legislated for in Finance Bill 2024
• Review of the complex Irish tax rules for deductibility of interest to be undertaken

VAT and Indirect Taxes

• Increase in the existing VAT registration threshold for services from €37,500 to €40,000 and for goods from €75,000 to €80,000
• Extension of the 9% reduced VAT rate for gas and electricity for another 12 months
• Deferral of the fuel excise increase that was due to take place in October until 1 April and 1 August 2024
• 0% rate of VAT on supply and installation of solar panels for schools
• VAT on audiobooks and ebooks to be reduced to 0%
• Excise on a packet of 20 cigarettes to go up by 75c with a pro rata increase on other tobacco products
• From 1 January 2024 increase of the total capped fund for the Charities VAT compensation scheme from €5m to €10m

Housing Initiatives

• Increase in the rent tax credit of €250 from €500 to €750
• Parents who pay rent for student children in full time education entitled to claim the tax credit
• Tax relief for landlords provided they remain in the letting market for the period of the relief of €3,000 @20% for 2023, €4,000 @ 20% for 2024 €5,000 for 2025 and 2026
• The vacant property tax will be increased from the current rate of 3 times the base rate of Local Property Tax in that area to 5 time.
• Once off measure to provide tax relief for home owners with an outstanding mortgage balance on 31 December 2022 of between €80k and €500k. Relief of 20% on the increased amount of interest paid in 2023 as compared to 2022, capped at €1,250
• The Help to Buy Scheme to be extended to the end of 2025 and to be reformed so that applicants for local authority affordable purchases can avail of the Help-to Buy scheme

Climate Change

• Extension of the VRT relief for battery electric vehicles for two years until the end of 2025
• The tapering mechanism applicable to BIK for electric vehicles is to be enhanced by extending the current original market value deduction of €35k until the end of 2025 followed by a reduction to €20k in 2026 and €10k in 2027
• Temporary universal relief of €10k that applied to the Original Market value of a vehicle in category A- D and the amendment of the highest mileage band to be extended to 31 December 2024
• Accelerated capital allowances for energy efficient equipment to be extended to 31 December 2025
• Increase in the exemption for microgeneration of electricity from €200 to €400
• Rate per tonne of carbon dioxide emitted for petrol and diesel increased from €48.5 to €56 from 11 October 2023

Agriculture

• Consanguinity relief extended for a period of 5 years until 31 December 2028
• Extension of the regime for accelerated capital allowances for farm safety equipment until 31 December 2026
• Increase of the maximum aggregate lifetime of certain farm related reliefs to €100k including the Young Trained Farmer relief, Stock relief for young trained farmers and the relief for succession farm partnerships
• Increase in the maximum amount of stock relief for registered farm partnerships that can be claimed from €15k to €20k
• Reduction in the flat rate VAT compensation scheme from 5.0% to 4.8%

Investment for the future

• Establishment of the Future Ireland Fund to help protect living standards and public services with a potential to grow to €100bn by the middle of the next decade
• Establishment of the Infrastructure, Climate and Nature fund to provide up to €14bn by 203 for investment in infrastructure, climate and nature related projects and to protect against economic downturns.

Overall, according to Mike Scanlan, Senior Tax Manager, RBK, the Minister sought to carefully balance the demands from households who are struggling with increased inflation and reduced spending power with the prudent approach of investing now for challenges that are on the horizon. The Minister also sought to provide incentives to businesses which is very much to be welcomed and is critically important for Ireland’s future competitiveness. The Minister concluded by acknowledging the difficulties ahead “We face challenges for sure, but we face them from a position of strength”.