Budget 2014

So what did the Minister for Finance say in Budget 2014 and how does it effect you?

The good news (if you could call it that) is that there is no increase in income tax or USC, so your pay on 1st January should be the same as the last one in December.

Very bad news for savers with DIRT on deposits and tax on insured investment policies increasing to a massive 41%.

Pension tax relief to remain in place. The maximum fund allowed is being reduced from €2.3m to €2m with effect from 1 January 2014.

The method used to calculate the value of pensions, especially defined benefit ones, was a very crude one; simply multiple the pension payable by 20. This is being replaced by a variable system that will take the retirement age into consideration as well as other factors.

The pension levy of 0.6% will be abolished at the end of 2014. A new one of 0.15% will be introduced for 2014 and 2015, so in 2014, all pension funds will pay a levy of 0.75%. This will continue to fund the jobs initiative as well as potential liability that may occur on the funding of pension schemes. I can see the pension industry fighting this one.

The Pension Reserve fund is to be no more and is going to be spent. That didn’t last long. Of course, these politicians will be long retired before the public pension tsunami hits this country.

Those paying high premiums for their health insurance will be hit hard. The tax relief for health cover will be limited to €1,000 per adult and €500 per child.

VAT will remain unchanged, including the lower 9% rate that was introduced to increase tourism numbers. The Air Travel Tax will be reduced to 0% (notice it hasn’t been abolished) from April 2014. I’m sure Micheal O’Leary will be happy!

On the old reliables, a packet of cigarettes will go up by 10c, a pint by 10c and a bottle of wine by 50c. Diesel, petrol and home heating oil will remain unchanged.

If you want to renovate your home, there is an incentive scheme being introduced where you get a tax credit for 13.5% of the value of improvements over €5,000 and under €30,000.  Everything has to be done above board and submitted to the Revenue, so there will be no “cash in hand” jobs done if you want to get relief and it is payable over 2 years.

Top slicing relief is to be abolished altogether. This relates to taxable lump sums payable on redundancy or retirement. Usually, this lump sums were large amounts and attracted tax at the marginal rate. Under top slicing relief, you calculated your tax rate based on your average earnings over the previous 3 years and applied it to the lump sum.

Overall, not too bad in so far as we won’t pay any more income tax. Not good for savers though who will see an 8%  increase in the tax on any gains.