Budget 2017

This document relates to the Budget announced in 2016. You can find our summary of Budget 2018, announced on 10 October 2017, here: citizensinformation.ie/en/money_and_tax/budget_2018.html.

Budget 2017 was announced on 11 October 2016.

This document sets out the main changes in the areas of taxation, social welfare, health, housing, education, employment and other areas. It is an overview and not a complete statement of the measures announced in Budget 2017.

This document will be updated throughout the week as more details become available.

Some of the changes announced in the Budget come into effect immediately. Others take effect from the beginning of January 2017 or later in 2017. Many others have to be finalised before coming into effect.

Some elements of these measures may change when the legislation required to bring them into effect is enacted.

For a full list of the Budget changes that were announced, please see the Department of Finance and Department of Public Expenditure and Reform website, budget.gov.ie.

Income tax

The Home Carer's Tax Credit that is given to married couples or civil partners where one spouse or civil partner works in the home caring for a dependent person is increasing from €1,000 to €1,100.

The Earned Income Credit (pdf) for taxpayers earning self-employed trading or professional income in certain cases and for business owner/managers who are ineligible for a PAYE credit on their salary income is increasing from €550 to €950.

The residential rental property relief available for qualifying interest payments on monies borrowed to purchase, improve or repair residential rental property is being increased from 75% to 80%. This measure will apply to both new and existing mortgages.

The ceiling for exemption from income tax under the Rent a Room scheme for income received from the letting of a room or rooms in a person’s principal private residence is being increased from €12,000 to €14,000 for 2017 and subsequent years.

An income tax rebate incentive for first-time buyers of new homes is being introduced to help fund the deposit required under the Central Bank macro-prudential rules. It will consist of a rebate of income tax paid over the previous four years up to 5% of the purchase price of up to €400,000. Where new homes are valued between €400,000 and €600,000 the maximum relief of €20,000 will continue to be available. The house must be a new build and applicants must take out a mortgage of at least 80% of the purchase price. The scheme will run until the end of 2019.

The Home Renovation Incentive (HRI), which provides an income tax credit to homeowners who carry out renovation and improvement works on their principal private residences, is being extended until 31 December 2018.

The Living City Initiative, which aims to assist the regeneration of retail and commercial districts and encourage families to live in historic buildings in city centres is being amended to encourage an increase in the take-up of the scheme. This involves extending the availability of the scheme to landlords, while for residential applicants it removes the restriction on the maximum floor size of the property, removes the requirement that the property must have been previously used as a dwelling, and reduces the minimum amount of expenditure needed to qualify.

A new Fishers Tax Credit is being introduced to assist the viability of the fishing sector. Fishers who have fished for wild fish or wild shellfish for at least 80 days in a tax year can claim an income tax credit of €1,270 per annum.

Foreign Earnings Deduction (FED) is being extended until the end of 2020. In addition:

• Qualifying countries are being extended to include Colombia and Pakistan
• The minimum number of days for travel is being reduced to 30 per annum

The Special Assignee Relief Programme (SARP) is being extended for a further 3 years until the end of 2020.

The Start Your Own Business tax relief is being extended for 2 years until the end of 2018.

Universal Social Charge (USC)

Incomes of €13,000 or less will continue to be exempt from USC in 2017. Once your income is over this limit, you will pay the relevant rate of USC on all of your income as follows:

• €0 to €12,012 @ 0.5%
• €12,012.01 to €18,772 @ 2.5%
• €18,772.01 to €70,044 @ 5%
• €70,044.01 to €100,000 @ 8%
• PAYE income in excess of €100,000 @ 8%
• Self-employed income in excess of €100,000 @ 11%

Medical card holders and individuals aged 70 years and over whose aggregate income does not exceed €60,000 will pay a maximum USC rate of 2.5%.

Deposit Interest Retention Tax (DIRT)

The rate of Deposit Interest Retention Tax will decrease by 2% each year for the next 4 years until it reaches 33%.

Capital Acquisitions Tax (CAT)

The Capital Acquisitions Tax tax-free thresholds are being increased as follows:

• The Group A threshold applying to gifts and inheritances from parents to children is being raised from €280,000 to €310,000
• The Group B threshold applying to gifts and inheritances made to parents, siblings, nieces, nephews or grandchildren is being raised from €30,150 to €32,500
• The Group C threshold applying to gifts and inheritances made to all others (except spouses and civil partners who are exempt) is being raised from €15,075 to €16,250

These increases apply in respect of gifts or inheritances received on or after 12 October 2016.

Excise duties

The excise duty on a packet of 20 cigarettes is being increased by 50 cents (including VAT) with a pro-rata increase on the other tobacco products, with effect from midnight on 11 October 2016.

The Vehicle Registration Tax (VRT) reliefs available for the purchase of hybrid electric vehicles and plug-in hybrid electric vehicles, are being extended to 31 December 2018. Reliefs available for electric vehicles and electric motorcycles are being extended to 31 December 2021.

The special relief reducing the standard rate of Alcohol Products Tax by 50% on beers produced in microbreweries which produce not more than 30,000 hectolitres per annum is being extended to apply to microbreweries which produce not more than 40,000 hectolitres per annum. Relief is still available on the first 30,000 hectolitres of beer produced.

The fuel inputs used to create high efficiency electricity in combined heat and power plants are being fully exempted from carbon tax.

Capital Gains Tax (CGT)

A reduced Capital Gains Tax rate of 10% will apply to the disposal in whole or in part of a business up to an overall limit of €1 million in qualifying chargeable gains.

Payments under the new raised bog restoration incentive scheme to relevant owners and rights holders will be exempt from Capital Gains Tax.

Agri Measures

The Farmer’s Flat-Rate Addition will increase from 5.2% to 5.4% with effect from 1 January 2017. Farmers not registered for VAT add a Flat-Rate percentage to their sales of produce and agricultural services to VAT registered customers who are entitled to reclaim such VAT in their VAT returns. The flat-rate scheme compensates the farmers for VAT incurred on their farming inputs.

The scheme of accelerated capital allowances for energy efficient equipment is being made available to sole traders and non-corporates.

The Income Averaging regime allows a farmer’s taxable profit to be averaged out over a 5-year period. This is being amended to allow an “opt out” in a single year of unexpectedly poor income, and, instead, pay only the tax due on a current year basis with any deferred tax liability becoming payable over subsequent years. This may be availed of for the 2016 tax year.

Farm restructuring CGT relief is available where the first transaction in the restructuring (e.g. sale, purchase or exchange of land) is carried out by 31 December 2016 with the restructuring to be completed within 24 months. The deadline for the completion of the first restructuring transaction is being extended to 31 December 2019.

The total social protection budget in 2017 will be €19.85 billion.

Increases in social welfare payments

Weekly social welfare payments will increase by €5 per week with proportional increases for qualified adults and those on reduced rates of payment (see rates table below). This also applies to employment programmes such as Community Employment (CE), Tús and Rural Social Scheme. (March 2017)

There will be a special increase of €15 in the weekly rate of Guardian’s Payment (Contributory) and Guardian’s Payment (Non-Contributory) from €161 to €176. (March 2017)

Back to Education Allowance

The maximum rate of Back to Education Allowance (BTEA) for jobseekers aged under 26 will be €193 per week. (September 2017)

A new €500 annual Cost of Education Allowance will be made available to Back to Education Allowance participants with children. (September 2017)

Rent Supplement

People aged 18-24 who are on age related benefits will pay less towards the cost of their Rent Supplement. The personal rent contribution will be reduced from €30 to €10 per week for Rent Supplement recipients who are getting Jobseeker’s Allowance (JA) of €100 per week and from €30 to €20 for those who are getting JA of €144. (January 2017)

For those getting BTEA, a Further Education and Training (FET) training allowance or on Youthreach, where the age-related rate of €160 applies, the personal rent contribution will be reduced from €30 to €20 a week. (January 2017)

One parent families

The earnings disregard for the One-Parent Family Payment and the Jobseeker’s Transition payment will increase by €20 per week, from €90 to €110 per week.

Carers

Carer’s Allowance will continue to be paid for a period of 12 weeks when the person being cared for moves permanently into residential care (January 2017).

People with disabilities

Funding of €2 million will be available for projects which provide pre-activation supports for people with disabilities in 2017.

Self-employed

Invalidity Pension will be extended to self-employed people (December 2017).

The Treatment Benefit Scheme will be extended to self-employed people (March 2017).

The qualification period for the Back to Work Enterprise Allowance will be reduced to nine months, down from 12 months.

Farmers

Farm income and other income from off-farm self-employment will be assessed at 70%, (down from 100%) for Farm Assist, with additional annual disregard of €254 for each of the first two children and €381 for the third and other children.

Farmers will be able to benefit from the extended social insurance cover for self-employed people.

Rural Social Scheme

The number of places on the Rural Social Scheme will increase by 500.

Treatment Benefit Scheme

Dental benefit will be expanded to include an annual free scale and polish and optical benefit will include the option of either free glasses or a contribution of €42 towards the cost of glasses (October 2017).

Christmas Bonus

A Christmas Bonus of 85% will be paid in December 2016 to people getting a long-term social welfare payment (minimum payment of €20).

People getting the following payments will receive the Bonus:

• State Pensions and Widow’s/Widower’s/Surviving Civil Partner’s Pensions
• Invalidity Pension, Blind Pension, Disability Allowance, Carer’s Allowance, Domiciliary Care Allowance and guardian’s payments
• Long-term Jobseeker’s Allowance including Jobseeker’s Transition payment, One-Parent Family Payment, Deserted Wife’s Benefit and Allowance and Farm Assist
• Back to Work Allowance, Community Employment, Rural Social Scheme, Tús, Gateway and Job Initiative

School Meals Programme

An additional €5.7 million is being provided towards the School Meals Programme, increasing the funding to €47.7 million in 2017.

Social welfare rates for 2017

Housing

A total of €1.2 billion is allocated to the Department of Housing, Planning, Community and Local Government for Housing in 2017. This will allow for continued implementation of the Housing Action Plan. Under the Plan, it is intended that 47,000 new social housing units will be delivered by 2021.

The total includes an Exchequer allocation of €50 million for the €200 million Local Infrastructure Housing Activation Fund, to accelerate the provision of public infrastructure to support the development of sites for private housing in urban areas. It is hoped that this fund will facilitate the delivery of up to 20,000 private houses by 2019.

In addition, local authorities will use €92 million from surplus Local Property Tax receipts to fund a range of housing services.

Social housing support

A total capital provision of €732m has been allocated in 2017 to support the delivery of 4,450 social housing units. These will be provided through construction and acquisitions by local authorities and approved housing bodies; Rapid Builds; Part V mechanisms; bringing an expected 800 vacant units back into use; and delivering new units under the National Regeneration Programme.

Under the Social Housing Current Expenditure Programme, a provision of €84 million is to support the delivery of 600 direct leased units in 2017.

An additional €105 million is allocated for the Housing Assistance Payment (HAP) in 2017, with a target of 15,000 households for transfer to HAP.

€134 million is allocated for the Rental Accommodation Scheme (RAS) with a target of 1,000 new RAS transfers.

Capital of €9m is to be provided in 2017 for Traveller-specific accommodation. This will also support the carrying out of fire safety works in Traveller accommodation.

It is expected that over 21,000 applicants for social housing will have their housing needs met in 2017.

Acquisition and renewal

The Housing Agency is being allocated a €70m Rotating Fund to acquire properties for social housing. The Fund is expected to deliver 1,600 units by 2020.

€6 million is being allocated in 2017 for a Repair and Leasing Initiative. Under this new initiative, local authorities will give financial assistance to owners of vacant properties to bring them up to standard, so that they can be leased for social housing. It is expected that this new initiative will deliver 150 units in 2017.

Under a new Buy and Renew initiative, local authorities and approved housing bodies will be supported to buy private housing units in need of remediation, renew them and make them available for social housing use. €25 million is being provided for this initiative in 2017.

Adaptations and remediation

Increased funding is provided for approximately 9,000 housing adaptation grants for older people and people with a disability.

€22 million is provided for remediation of an additional 400 dwellings under the Pyrite Remediation Scheme.

Supports for homeless people

The current allocation for homelessnessservices is increased by approximately €28 million, to €98 million.

It is intended that there will be 3,000 exits from emergency accommodation in 2017 and that hotels will only be used in limited circumstances by mid-2017.

Through the expanded Housing First programme, it is intended that 300 people will move from homelessness into supported tenancies in Dublin and other major urban areas.

These measures will be supported by increased funding in the areas of mental health and addiction from the Department of Health and by additional supports for children and families from the Department of Children, Equality, Disability, Integration and Youth .

Supports for home-buyers

An income tax rebate, the Help-to-Buy incentive, is being introduced to help first-time buyers of newly built homes to fund the deposit required under the Central Bank’s rules. It also applies to once-off self-build homes. It will consist of a rebate of income tax paid over the previous 4 years.

To qualify for the scheme, applicants must take out a mortgage of at least 80% of the purchase price (or, for a self-build, 80% of the valuation approved by the mortgage provider).

For new homes costing up to €400,000, a rebate of up to 5% of the purchase price will be available. For homes costing between €400,000 and €600,000, the maximum relief will be €20,000.

No relief will be available for homes costing more than €600,000.

This incentive will run until the end of 2019. It is intended to apply with effect from 19 July 2016.

Housing tax reliefs

The Home Renovation Incentive is being extended until 31 December 2018.

The ceiling for exemption from income tax under the Rent- a-room relief is being increased from €12,000 to €14,000 for 2017 and subsequent years. This relief relates to income received from the letting of a room or rooms in a principal private residence.

Rent tax relief will continue to be reduced, as announced in Budget 2011:

Maximum qualifying amounts for 2017

• Single under 55 years: €200
• Single over 55 years: €400
• Married or in a Civil Partnership, Widowed or a Surviving Civil Partner, under 55 years: €400
• Married or in a Civil Partnership, Widowed or a Surviving Civil Partner, over 55 years: €800

Mortgage interest relief, which only applies to mortgages taken out by 31 December 2012, was due to end on 31 December 2017. It will now be retained beyond this date, on a tapered basis. Details are to be announced in Budget 2018.

The previously announced rates and ceilings will apply in 2017 in accordance with the tables published by Revenue.

Other property reliefs

The Living City Initiative property tax incentive is being extended to landlords. For residential applicants, the restriction on the maximum floor size is being removed. The requirement for the property to have been previously used as a dwelling is also being removed. The minimum amount of expenditure needed to qualify is being reduced.

Mortgage interest deductibility for landlords of residential rental property is being increased from 75% to 80% with effect from January 2017. This will apply to both new and existing mortgages.

Student accommodation

There will be new support from the Ireland Strategic Investment Fund (ISIF) for investment in student accommodation. Higher education Institutions will also be able to access low-cost loan finance from the Housing Finance Agency.

It is intended that the increase of €2,000 in the ceiling for Rent-a-room relief will help to increase the supply of accommodation for students.

Planning

An Bord Pleanála is to get extra funding to support the implementation of fast-track measures for applications for large residential developments.

Rental sector strategy

A new strategy for the rental sector is due by end 2016.

Employment and Business

Employees

Increase in minimum wage

From 1 January 2017, the statutory minimum wage will increase to €9.25 from €9.15 per hour.

Small and medium businesses

CGT entrepreneur relief

A reduced Capital Gains Tax rate of 10% will apply to the disposal in whole or in part of a business up to an overall limit of €1 million in qualifying chargeable gains.

Earned income credit

The Earned Income Credit (pdf) will increase from €550 to €950 for self-employed taxpayers.

Start Your Own Business Relief

The Start Your Own Business tax relief is being extended for 2 years until the end of 2018.

Fishers tax credit

Fishers who have fished for wild fish or wild shellfish for at least 80 days in a tax year can claim a new income tax credit of €1,270 per annum.

Share-based incentive scheme

A new share-based incentive scheme focused on small and medium enterprises (SMEs) to be introduced in budget 2018.

Other measures

The Foreign Earnings Deduction and the Special Assignee Relief are being extended until the end of 2020.

Education and Childcare

Childcare

Affordable Childcare Scheme

From September 2017 a new Single Affordable Childcare Scheme will provide a targeted subsidy, based on parental income, for children aged between 6 months and 15 years and a universal subsidy, for all families, for children aged between 6 months and 3 years.

Targeted subsidy: The highest level of subsidy will be provided to those on incomes up to €22,700 net per annum – this will be approximately €8,000 a year, based on the maximum of 40-hours childcare a week. The rate of subsidy will taper downwards as net income rises, with no targeted subsidy payable when net income reaches €47,500. The income thresholds increase if there is more than one child in the family.

Universal subsidy: Up to €80 per month will be provided towards childcare costs. This equates to over €900 per annum for parents working full-time and will be paid pro-rata.

Both of these subsidies will be paid for children attending a Tusla-registered childcare provider – including centre-based providers and child minders.

Pre-school education

An additional €86 million has been provided for the full year costs of the extended Early Childhood Care and Education Scheme and the rollout of the Access and Inclusion Model (AIM) to enable children with disabilities to access the scheme.

Education

Primary and post-primary schools

An additional 2,400 teaching posts in schools are to be funded in 2017 including:

• 680 extra teachers
• 900 extra resource teachers to support a new model of special education
• 100 new posts for career guidance

In addition, a further 115 Special Needs Assistants will be provided from January 2017.

Higher and further education

In 2017, an additional €36.5 million will provide for over 179,000 full-time enrolments.

€8.5 million will help more disadvantaged students, including lone parents and Travellers, to attend higher level. This includes €4 million to introduce full maintenance grants from September 2017 for the most disadvantaged postgraduate students.

Funding will be allocated to provide for increased demand for traditional apprenticeships and the rollout of apprenticeships in new sectors.

Health

Medical cards will be provided to all children in receipt of Domiciliary Care Allowance.

The €25 cap on prescription charges will be reduced to €20 for people over 70 from 1 March 2017.

Funding for the National Treatment Purchase Fund will increase, from €5 million to €20 million, for an initiative to address waiting lists, targeted at those who have been waiting longest.

€10 million in new development funding will be provided for homecare, including home help and home care packages, in addition to €3.8m to support the increased cost of existing services.

Additional funding of €18.5 million will be provided to support the development of primary care services.

€3 million is provided for preparations for the new National Drugs Strategy and other social inclusion measures.

Environment

Energy and climate action

Funding of €500,000 is allocated for the establishment of a National Dialogue on Climate Change.

A total of €90 million is allocated for a new Renewable Heat Incentive Scheme, the Better Energy Grant schemes and the Electric Vehicles Subsidy. The Warmth and Wellbeing pilot scheme is being expanded and will have an allocation of €8 million in 2017.

Funding for the Green Low-Carbon Agri Environmental Scheme (GLAS) is increased by €69 million, with an expected total of 50,000 participants in 2017.

The Vehicle Registration Tax (VRT) reliefs available for the purchase of hybrid electric vehicles and plug-in hybrid electric vehicles are being extended to 31 December 2018. Reliefs for electric vehicles, including electric motorcycles, are being extended to 31 December 2021.

The fuel inputs used to create high efficiency electricity in combined heat and power plants are being fully exempted from carbon tax.

Payments under the new raised bog restoration incentive scheme to relevant owners and rights holders will be exempt from Capital Gains Tax.

Environmental projects

A €44m package is provided for flood relief schemes.

An additional €2 million is being provided for the Environmental Protection Agency to target illegal dumpers. A total of €13 million is provided for landfill remediation.

Other Announcements

800 new Gardaí will be recruited in 2017, along with up to 500 civilian staff.

Capital funding for IDA Ireland will be increased by 22% to €137m.

50 new posts will be funded in the Department of Jobs, Enterprise and Innovation and its agencies to respond to Brexit.

Charities and VAT

Charities are exempt from VAT under the EU VAT Directive and as a result cannot recover VAT incurred on goods and services that they purchase.

The Department of Finance plans to engage again with the Irish Charities Tax Reform Group to review options for how charities might be compensated in relation to VAT.