Here are some of the main changes in Budget 2017 announced by Michael Noonan:
- The Earned income for Self Employed increased by €400 per year, We think this is worth a closer look, so we have added a more detailed note on this below.
- “Help to Buy” scheme introduced for first time home buyers
- Small reduction 0.5% in some USC rates
- Capital Acquisitions Tax Thresholds increased (Class A will be €310k).
- 2% reduction in DIRTax rate to 39%.
- Interest relief for buy-to-let mortgages increased to 80%
- CGT on sale of businesses reduced from 20% to 10%.
- No change to Pension Tax Reliefs – Pension is still one of the most efficient methods of converting your Income into Wealth.
- State Pension increased by €5 from 1st March. The full State Pension Pension will now be €12,610 per year, or €25,220 per year for a couple. We pay particular attention in Financial Planning to positioning both Spouses to qualify for the maximum State Pension where possible.
- Farmers can temporarily opt out of Income Averaging.
- if you have any queries give Aidan a call at 087 2621006 or Michael at 085 866 9813.
Increase in Earned Income Tax Credit for the self-employed and proprietary directors in Budget 2017
Proprietary directors, and their working spouses/civil partners, have traditionally been discriminated against because although they paid their income tax under PAYE like everyone else, they could not claim the PAYE tax credit of €1,650 available to all others paying income tax under PAYE.
In Budget 2016, a tax credit at standard rate was introduced for 2016 for the self-employed and working proprietary directors and their working spouses/civil partners on their earned income, to a maximum credit of €550.
This maximum tax credit is being increased by €400 to €950 for 2017.
In the case of a family company the tax credit will be available to each employee who is not entitled to the normal PAYE tax credit, so that a husband and wife both working in the business and drawing Schedule E income from it, will each be entitled a tax credit of 20% of their earned income, to the maximum €950 tax credit in 2017.
Where an individual has two sources of income, one entitled to the PAYE tax credit and another entitled to the earning income tax credit, the combination of the two tax credits can not exceed €1,650.
The increased tax credit may encourage more spouses/family members to work in family businesses, thereby increasing retirement funding potential.
This is just a brief list of the main points of change announced in Budget 2017. If you plan to act on any of these points, you should first obtain professional advice.
Aidan Wall QFA, FLIA, SIA Michael Wall APA PhD
Lifetime Financial Planning