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  • Writer's picturePeter Feighan

Budget 2021 & Finance Bill 2020

Given the level of uncertainty due to the COVID -19 pandemic and Brexit, there was little room for manoeuvre for Pascal Donoghue and Michael McGrath. They announced a package of spending measures of €14.6 billion while largely maintaining all existing income/capital gains tax rates and reliefs.


Budget 2021 is cautious in nature and that was to be expected, keeping people in work is the main priority which is borne out by the extension of the wage subsidy scheme, expanding the tax warehousing scheme and potential new supports for remote working.


Looking into the future, the outcome of Brexit and the pandemic will shape government budgetary policy to a significant degree, for now its about keeping the ship steady for the choppy seas that lie ahead.


A brief summary of the measures is outlined below with a focus on areas that impact business, employment, financial planning and investments.


Income Tax

Income tax rates and bands will remain unchanged for 2021. There were 2 tax credit increases:

  • The earned income credit for self employed and proprietary directors is increase from €1,500 to €1,650. This now matches the employee PAYE tax credit.

  • The Dependent relative credit is increased from €100 to €245

Investment Taxes

DIRT, Exit Tax and the life assurance premium will remain unchanged for 2021. There is still a large gap between DIRT at 33% and exit tax at 41% which should be aligned in our view.


Pensions

No increase in the State pension for 2021 and the State Pension age will stay at age 66 for individuals reaching 66 in 2021. The Christmas bonus of 100% of the weekly rate of State Pension will be paid this Christmas.

No changes to tax reliefs for private pensions or the Standard Fund Threshold (SFT) of €2m. The threat of a pension levy and/or a reduction in the Standard Fund Threshold are real going forward given the borrowing programme the Government has undertaking due to the pandemic.


Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT)

No changes to the rates for CGT & CAT or the threshold amounts for CAT. A reduction in CGT had been mooted to help boost economic activity but it has not been forthcoming.


Business/Agricultural Reliefs

A change to CGT Entrepreneur Relief has been announced, an individual who held at least 5% of the shares for a continuous period of any 3 years qualifies. The individual will still have to work in the business for three out of the five years before disposal. This will come into effect from 1 January 2021.

Consanguinity (Stamp Duty) Relief is being extended from its current expiry date of 31 December 2020, to 31 December 2023. It provides, under certain conditions, for a 1% rate of stamp duty to be applicable where a transfer of agricultural land (by sale/purchase, exchange or gift) is made to certain close relations, such as a mother to son or uncle to niece.

For the Hospitality and Tourism sector there is a welcome reduction in VAT from 13.5% to 9% which is effective until December 2021.



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