Tax Return Plus Budget 2022 Highlights
Budget 2022 was presented today (12th October 2021). Our tax experts have comprehensively reviewed the budget and its implications for our clients. We hope you will find this summary informative.
General Overview of the Budget
The introduction in recent years of the Earned Income Tax Credit to €1,650 for the self-employed has been a welcome development. This puts self-employed people on an equal footing to PAYE employees in relation to Tax Credits.
An increase in the Tax Band in Budget 2022 by €1,500 will result in a tax saving of €300 for taxpayers who pay tax at the higher rate of 40%. An increase of in the Personal Tax Credit, Employee Tax Credit (Formerly the PAYE Tax Credit) and the Earned Income Tax Credit by €50 bringing the value of each credit to €1,700.00, will add an additional €100 to most taxpayers take home pay. Furthermore, an adjustment to USC thresholds will result in an additional tax saving of €15.20 from 2022 for those earning over €21,295.
For example, where a single taxpayer with a PAYE income of €35,000 and additional non-PAYE income such as rental income or a part-time trade of €10,000, Budget 2022 has delivered an overall tax and USC saving of €415.20.
Irish Resident Landlords
The pre-letting expenses relief of up to €5,000 has been extending for a further three years, up to the end of 2024. There has also been an additional €50 million allocated to a scheme called the Croí Cónaithe fund, which effectively encourages the refurbishment of properties on the main streets of towns and villages. However, November 2021 will see a revision of the valuations of properties for Local Property Tax purposes. This revised valuation will be in place from 2022–2025. Most properties would have increased in value since the previous valuation date in July 2013.
The points mentioned in the Irish Resident Landlords section above will also apply to Non-Resident Landlords. The increase by €50 of the Personal Tax Credit will have a proportioned positive impact on most Non-Resident Landlords. Revenue is also set to continue with the requirement to appoint a Collection Agent unless the tax is paid on an ongoing basis by a tenant.
Capital Gains Tax
The annual personal gain exemption threshold of €1,270 has not been adjusted in Budget 2022, and the rate for CGT remains at 33%.
Capital Acquisitions Tax & Gift Exemption
The annual personal gift exemption of €3,000 per individual gift has not changed and the tax rate for CAT remains at 33%.
The thresholds relating to inheritance and Gifts have also remained in line with previous years having been last changed in Budget 2020.
Employees Availing of Share Benefit Schemes
As per the general overview above you will benefit from the adjustment to the tax rate bands, tax credit increases and USC rate changes. Another point to note is that the allowance for Light & Heat has increased to 30% up from a previous 10% for those that Work from Home in 2022. This means an allowance of 30% can be claimed on Broadband, Light & Heat.
As per the Capital Gains Tax Section, there has been no change in either the personal gain exemption or the rate of CGT. On the topic of share acquisition, there has been no change despite many stakeholders seeking changes for several years.
Relevant Contracts Tax
As mentioned previously, you will benefit from the adjustment to the tax rate bands, tax credit increases and USC rate changes. A single RCT registered Subcontractor earning €40,000 in 2022 can expect to save €415.20 tax per year.
There has been no adjustment to RCT deduction rates in the Budget. The tax saving associated with Budget 2022 will be of help as the price of a litre of diesel/petrol has increased due to Carbon Tax. Travel costs are often an expense incurred by those that operate as Subcontractors.
There has been no change in the Corporation Tax rate of 12.5% in Budget 2022. Last week’s announcement that Ireland’s Flagship Corporation Tax Rate of 12.5% will increase to 15% subject to agreement from 2023 has raised many queries. This change will affect companies based in Ireland who earn more than €750 million.
Other Points of Interest
• Employees Wage Subsidy Scheme (EWSS) has been extended to April 2022.
• A rate of 3% Tax will be applied to the market value of unused Zoned Land to discourage land hoarding.
• Help to Buy Scheme has been extended up to the end of 2022.
• Reduced VAT rate of 9% will apply to the hospitality sector until the end of August 2022.