Budget 2013

Minister for finance , Michael Noonan delivered his second budget this afternoon.

The aim of this year’s budget was to get back at least €3.5 billion in a combination of cuts to spending and in increased taxation. Minister for Finance, Michael Noonan opened his speech by saying the government wanted to give the critical small to medium enterprise sector a ‘helping hand’. Several new measures were introduced but with the Minister himself accepting they were ‘modest’.

Read on to see how Budget 2013 will affect you and your business.

  

The highlights:

• Specifics on the new property tax were finally announced. The basic rate has been set at 0.18% of the value of your home which will equate to roughly €300 to €500 per house. A higher, so called ‘mansion tax’ rate of 0.25pc on the portion of value over €1m has also been introduced. The Property Tax is due to take effect from July 2013 so homeowners will pay half a years liability in 2013 with the full amount falling due in 2014. A self assessment system will apply with Revenue publishing a guide on how to value your home soon. Alternatively, homeowners are free to consult with an estate agent on finding the correct value.

 

• Anyone earning over €60,000 who has been contributing to a pension faces a heavy hit as a result of this budget. Up until now, depending on your age, you could avail of tax relief on your pension contributions ranging from 15- 40% of your income subject to a maximum income threshold of €115,000. The % relief stays the same however the €115,000 threshold has been lowered to €60,000. This exposes a large chunk of income that would ordinarily have been sheltered from tax to the top tax rate. This will not take effect until January 2014 so there is time to make top up payments to your pension before then.

 

• The minimum amount of PRSI the self employed earning over €5k must pay has been increased from €253 to €500. So someone who is self employed with a profit of say €6,000 will see their PRSI bill go up from €300 to €500.

 

• Two big changes will affect PAYE workers as a result of this budget. PRSI will now be charged on income that is not from employment – such as rental profit and dividends from shares. This will only affect PAYE workers as self employed individuals already pay PRSI on this income. Take for example a married couple renting out a home with rental profit of €2,500. Next year will see them landed with an additional liability of €125. The same is true of anyone receiving dividend income.

 

• As well as this,the PRSI free allowance has been cut meaning a large swathe of people will now pay more PRSI. From January 2013, the first €127 of weekly income will no longer be exempt from the 4 per cent PRSI charge which means that everyone earning €18,304 per year or more will have an additional liability of €264 per year.

 

Some Good News:

• Start-ups will be able to extend the period in which they do not have to pay corporation tax. Previously, unused credits in this area were lost. Today’s budget will allow companies to bring forward any unused credits.  

• To assist with cashflow, the threshold to qualify for the ‘cash receipts’ basis of VAT, whereby you  only pay over VAT to the Revenue once you have actually received the money for a sale has been increased to €1.25million. This means more businesses out there will qualify.

• Hauliers will be able to avail of a rebate on diesel from July 2013. The exact amount will be 7.5 cent per litre.

• The R&D tax credit will be amended to double the initial spend eligible for credit from €100,000 to €200,000.

   

 If you want to discuss how any of the issues in this years budget will impact on you and your business get in touch today.

Date published 1 Dec 2012

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.