The self employed benefit from Budget 2017

Budget 2017 was announced last week in the Dáil. I am not going to go through all of the details of the Budget, there were a few items that caught my eye. The self employed do especially well out of Budget 2017.

The Self employed benefit

The self employed (and proprietary directors) got a lot of benefits in this budget.

1. The earned income tax credit was increased by €400 to €950 with effect from 01 January 2017. While this is welcomed, it is still a far way off the €1,650 PAYE credit that employees get.
2. The Invalidity Pension will be extended to the self employed. Previously this benefit was not provided to the self employed.
3. The Treatment Benefit Scheme was also extended to the self employed. This essential means free glasses, hearing aids and an annual dental check.

The Invalidity pension and Treatment Scheme are funded by employer’s PRSI, which self employed people do not pay. This makes me suspect that there will be an increase in PRSI contributions for the self employed in the future.

For those with an income protection cover, remember that the maximum you can claim is 75% of salary less anything paid by the State. The payment of this benefit may result in you being over insured, so you may need to review the level of cover you have in place.

Capital Acquisition Tax

The threshold on Inheritance Tax from a parent to a child was increased from €280,000 to €310,000. The remainder is still taxed at 33%. There were minor tweaks to the other two thresholds.

This is a long way from 2009 when you could inherit €545,544 and pay tax at 20% on the remainder. Ireland currently pays the highest level of inheritance tax of all modern economies.

DIRT

DIRT on deposit interest is to be reduced by 2% each year for the next 4 years to bring it down to 33%. With interest rates currently so low, this will not make much of a difference to how much extra is put into your bank account when the interest is paid.

Clients looking for higher than interest rate returns have had to invest their money instead of deposits. The exit tax on their profit is taxed at 41%. There was no announcement in the Budget to reduce this exit tax in line with the reduction of DIRT. I expect lobbying by the insurance companies to have this tax reduced in line with DIRT.

Help to Buy Scheme

An income tax rebate was announced for first time buyers of new homes

1. A tax rebate of any income tax paid in the previous 4 years for first time buyers.
2. It only applies to new builds or self builds from 19 July 2016 onwards.
3. If being bought by a couple, both have to be first time buyers.
4. The maximum rebate is €20,000 per property (not per joint owner).
5. The rebate is also limited to the actual amount of income tax paid in the previous 4 years. So if you paid less than €20,000 income tax, you get a rebate of the actual income tax paid.
6. The rebate only applies where the loan to value is at least 80%.
7. The rebate does not apply to house purchases over €600,000.

I presume that the last two points are included that if you can afford a deposit greater than 20% or can afford a house worth over €600,000, you are doing alright as it is.

There were no changes made to pensions in the Budget to speak of. The devil is always in the detail though. The Finance Bill is announced on 20 October so we will be keeping a close eye on that to see what it says.

If you have any questions, you can contact me directly at steven@bluewaterfp.ie