Income Tax
No changes to rates or cut-off points. However the Service Charges credit (for domestic waste/sewage disposal and domestic water charges) has been abolished for 2012 and the Rent Credit limits have been reduced as follows:
|
2012 |
2011 |
|
| Single under 55 |
1,200 |
1,600 |
| Sinlge over 55 |
2,400 |
3,200 |
| Married/widowed under 55 |
2,400 |
3,200 |
| Married/widowed over 55 |
4,800 |
6,400 |
Note that the Rent Credit for the years 2011 onwards applies to individuals who were renting a property on 7 December 2010. No credit is due to individuals who began renting after 7 December 2010.
Mortgage Interest Relief
Mortgage interest relief will increase to 30% for first time buyers who purchased their home between 2004 and 2008.
The relief will not be available for houses purchased after 31 December 2012.
Universal Social Charge (USC)
In 2011, an individual was exempt from USC where the total income for the year was €4,004 or less. This exemption limit has been raised to €10,036 for 2012.
USC will also be on a cumulative basis in 2012.
PRSI
The 50% employer PRSI relief on pension contributions has been abolished.
From 2013, the PRSI base will be expanded to include rental, investment and other income.
Household Charge
Homeowners will be required to pay a €100 household charge in 2012. The charge can be paid online or through post offices and may be paid in instalments. It will be the responsibility of the homeowner to pay the charge. Fines of up to 30% can be levied for late payment. Note that the charge applies to owners rather than tenants or occupiers.
Certain homeowners will be exempt from the charge including those living in a “ghost” estate, in receipt mortgage interest supplement or those receiving a social welfare payment whereby mortgage interest can be paid for up to a year after a homeowner is made unemployed.
The household charge is likely just the first step in the implementation of a property tax.
Corporation Tax
The rate of Corporation Tax will remain at 12.5%.
The Corporation Tax exemption for start-up companies is extended to 2014.
Redundancy Rebate
The rebate received by employers for statutory redundancy payments will be reduced from 60% to 15% from January 2012.
Research and Development
The first €100,000 of qualifying Research and Development expenditure will not be restricted to 2003 level when calculating the R&D credit.
Companies can use R&D credits to reward key employees involved in R&D. Details to be set out in the Finance Bill.
The outsourcing limits for R&D costs are being amended to the greater of the current percentages (5% for subcontracting to third level institutions, 10% for other) or €100,000.
VAT
Standard rate of VAT will increase from 21% to 23% from 1 January 2012.
This rate of VAT applies to items such as cigarettes, alcohol, petrol, diesel, minerals, fruit juices, confectionery, telephone charges, appliances, furniture, adult clothing, motor vehicles, toys, cosmetics, cleaning products and electronic goods as well as professional fees such as legal fees and accountancy fees.
The change in rate will necessitate changes to accounting systems, menus and signage for business owners, some of whom are facing the second change in VAT rates in less than a year.
DIRT
DIRT will increase by 3% to 30% for ordinary deposit accounts. An increased retention rate of 30% will also apply to life assurance policies and investment funds, with a higher rate of 33% for payments made less frequently than annually.
Capital Gains Tax
The CGT rate has been increased from 25% to 30% for disposals on or after 7 December 2011.
If a property is acquired from 7 December 2011 to 31 December 2013 and is held for at least seven years, the gain attributable to that seven year period will be exempt from CGT.
There are changes to Retirement Relief (subject to a 2 year transitional period for individuals who are currently 66 years of age):
- Disposals to family members: A limit of €3 million on retirement relief will be imposed where an individual making an intra family transfer is over the age of 66.
- Disposals to non-family members: The €750,000 limit is reduced to €500,000 where the individual making the transfer is over the age of 66.
Capital Acquisitions Tax
For gifts/inheritances taken on or after 7 December 2011, the CAT rate has been increased from 25% to 30% and the tax-free amount that a child can receive from a parent has been reduced from €332,084 to €250,000.
Stamp Duty
Stamp duty on non-residential property has been reduced to a flat rate of 2% from 7 December 2011.
Property
From 1 January 2012, where an individual has gross income over €100,000 a surcharge of 5% will apply to income sheltered by property reliefs. Gross income is defined according to the High Income Earnings Restriction. Owner-occupiers are not affected.
Accelerated capital allowances cannot be carried forward past the later of the tax life of the scheme or 2014.
Pensions
The annual imputed ARF distribution is increased from 5% to 6% for ARF’s with assets valued at greater than €2 million from 31 December 2012 onwards. This will also apply to vested PRSAs.
Increase in tax from 20% to 30% on ARFs when passing to the next generation.
Agriculture: Stock Relief
Subject to clearance with the European Commission, an enhanced 50% stock relief is being introduced for all registered farm partnerships and a 100% stock relief for certain young trained farmers forming such partnerships.
Social Welfare
From 1 January 2012, Child Benefit will be reduced for the third and subsequent children. In 2012 the monthly rate for the third child will be €148 and for the fourth and each subsequent child will be €160.
The grant of €635 paid at birth on all multiple births and further grants of €635 paid when the children are 4 and 12 years of age will be discontinued.
The age at which a child is eligible for the Back to School Clothing and Footwear Allowance will be raised from 2 to 4 years. The rates will be decreased by €50 per child.
Changes to the One Parent Family Payment continue with the age to which the payment is made will be reduced to 12 years of age in 2012. Further changes are expected in future budgets.
From March 2012, claims for State Pension (Contributory & Transition), Surviving Civil Partner’s Contributory Pension and Widow(er)’s Contributory Pension will only be backdated 6 months. Currently certain late claims can be backdated for up to 5 years.
Fuel Allowance season will be reduced by 6 weeks from 32 weeks to 26 weeks for all recipients.
From July 2012, Jobseeker’s Benefit for a person working for part of a week will be based on a 5-day rather than a 6-day week.
Other social welfare changes can be found here.
Other Announcements
- Domicile Levy: the requirement of citizenship has been removed.
- Special Assignee Relief Programme: Further details of this relief, designed to enable multinational and indigenous companies to attract key people to Ireland, will be set out in the Finance Bill.
- Foreign Earnings Deduction: Where an individual spends at least 60 days per year developing markets for Irish businesses in Brazil, Russia, India, China and South Africa, a foreign earnings deduction will apply. Details to be set out in the Finance Bill.
- Illness Benefit: The 36 day tax exemption for illness benefit has been removed.
- Renewable Energy: the qualifying period for investment in certain renewable projects will be extended to 31 December 2014.
- Motor tax: increase in all categories from 1 January 2012
- Carbon tax: carbon tax will increase by €5 to €20 per tonne from 7 December on petrol and diesel and for other fuels from 1 May 2012.
