Key measures announced in the Budget include:

Income Tax

The standard rate band is to be increased by €2,000 to €42,000. There will be proportionate increases for single-person child carers, married couples, and civil partners.

Various other tax credits will also increase, including the Rent Tax Credit (from €500 to €750).

The 2% Universal Social Charge (USC) rate band will increase from €22,920 to €25,760. The 4.5% USC rate band will be reduced to 4%.

A Mortgage Interest Relief tax credit of €1,250 was introduced for the 2023 tax year, relating to the increase in mortgage interest paid on a principal private residence between 2022 and 2023.

All rates of PRSI will be increased by 0.1% from October 2024.

Business Tax

Research & Development: The tax credit will increase from 25% to 30% and the first-year payment threshold will increase from €25,000 to €50,000.

The minimum effective tax rate for OECD Pillar 2 in-scope businesses will be set at 15% on their profits in respect of each country in which they operate.

Property Tax

A new temporary tax relief for residential rental income will be introduced for landlords. Subject to certain conditions being met, €3,000 of rental income will be disregarded for income tax at the standard rate of 20% in the 2024 tax year. This figure will increase to €4,000 for the 2025 tax year and €5,000 for the 2026 and 2027 tax years.

Capital Gains Tax

A new relief for investors in innovative startup SMEs has been announced. For significant minority shareholdings, it will provide a lower CGT rate of 16% (18% when held through a partnership) for gains on qualifying investments, up to a value of twice the initial investment. A minimum holding period of 3 years will apply, as well as a lifetime relief limit of €3 million. 

The upper age limit for retirement relief will increase from 65 to 70 from 1 January 2025. From this date, a new limit of €10million on the relief will also apply in relation to asset disposals to a child.

VAT

From 1 January 2024, the VAT Registration Thresholds for services and goods will increase to €40,000 and €80,000 respectively.

The temporary 9% reduced rate applicable to supplies of gas and electricity will be extended for another 12 months to 31 October 2024 and, from 1 January 2024, the 0% rate will apply to supplies of eBooks, audio books, and the supply and installation of solar panels in schools.

Modernising the administration of VAT – a Consultation

On 13 October, Revenue launched a consultation on modernising the administration of VAT, focusing on how digital advances can be used to modernise Business to Business (B2B) and Business to Government (B2G) VAT reporting. The consultation, which is the first in a series of VAT-modernisation engagements, runs until 12 January 2024. 

The proposal for VAT-stakeholders to consider is for B2B and B2G transactions to be brought into the realm of real-time, digital VAT reporting, supported by eInvoicing. Business to consumer (B2C) transactions, VAT accounting, payments, and repayments will be addressed in future consultations. 

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Paschal Donahoe, Minister for Public Expenditure, has said that the 2024 Budget is going to be ‘big’. The reason for this is likely due to the corporation tax windfall: corporation tax revenues are so high, the government is able to run a budget surplus. With Ireland’s corporation tax rate of 12.5% being among the lowest in the developed world, major US companies are choosing to pay tax on their international profits here. How will this surplus affect the tax measures that are announced in October? We cannot be certain, but we can consider what has already been announced and arrive at some key tax predictions for the Budget.

Personal Tax

Taoiseach Leo Varadkar has said that the budget will prioritise middle-income families and workers who pay too much tax. He has also said that he wishes to raise the point at which people pay the higher rate of tax. However, the Central Bank of Ireland and the Economic and Social Research Institute have both warned that excessive tax cuts will risk fueling inflation. 

Business tax

There are doubts that the high corporation tax receipts from the international sector cannot be sustained in the long term, so there are calls to mitigate the risk of over-reliance on this sector. One way of doing this is by providing tax reliefs aimed at the indigenous business sector. In the Irish Tax Institute’s pre-Budget submission, they call on the Minister for Finance, Michael McGrath, to stick to his commitment to take a fresh look at the range of enterprise tax measures, in particular, their complexity and barriers to entry.

VAT

The current temporary VAT reduction on supplies of electricity and gas (from 13.5% to 9%) is set to end on 31 October 2023. We could see this measure being extended if energy prices have not started to decrease sufficiently.

Property Sector

In their Pre-Budget submission, KPMG advised the government to introduce measures to help the struggling housing sector. They remind the government that the recent EU Directive gives Ireland greater flexibility in respect of reduced and super-reduced rates of VAT, which could be applied to the supply of new housing. KPMG also recommends that the government introduces tax reliefs for converting old commercial buildings into homes.

The rental market is also struggling, with a shortage of available properties and many landlords choosing to exit the market. The government may announce tax measures designed to encourage growth in this sector.

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