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Personal Tax

Finance Bill 2017 legislates for Budget 2018 measures as detailed below and introduced some new technical amendments to existing provisions including:

  • Imposition of a benefit in kind (BIK) charge on employees of health or dental insurance companies who receive free or reduced cost policies from their employers 
  • Tightening up of the BIK rules on preferential loans to employees to prevent certain perceived abuses
  • Technical changes to the domicile levy which applies to Irish domiciled individuals who meet certain criteria in a particular year (broadly, own assets in excess of €5m, have a worldwide income

Confirmation of Budget 2018 Measures

USC reductions and increase to the income tax standard rate band 

As anticipated, Minister Donohoe introduced a number of changes to the rates and bands for USC, which are aimed at easing the tax burden on low and middle-income earners. The changes include:

  • Reducing the 2.5% USC rate to 2% and widening the band to which this rate applies to €19,372 from €18,772 
  • Reducing the 5% USC rate to 4.75%

Other USC rates remain unchanged. 

The level of income at which people begin to pay the marginal rate of income tax of 40% is to be increased by €750 in 2018. This results in a single person reaching the higher income tax rate at an income level of €34,550. 

The combined effect of the above measures is a reduction in the marginal rate of tax for those earning between €34,551 and €70,044 to 48.75%. Unfortunately, the marginal rate of tax for those earning in excess of €70,044 remains at 52% (for employees) and 55% (for self-employed earning over €100,000).

The new USC bands and rates for 2018 are outlines below

Income BandUSC Rate % 
EmployeeUp to €12,0120.5%
€12,012 - €19,3722%
€19,372 - €70,0444.75%
Over €70,0448%
Self-EmployedUp to €12,0120.5%
€12,012 - €19,3722%
€19,372 - €70,0444.75%
€70,045 - €100,0008%
Over €100,00011%

Medical card holders and individuals aged over 70 earning less than €60,000 per annum will continue to pay USC at a maximum rate of 2%. 

Amalgamating USC and PRSI 

The Minister announced plans to establish a working group to plan the process of amalgamating USC and PRSI over the medium term. We anticipate that this will be a complicated process given the key differences in how these taxes currently apply. 

Earned Income Credit

The Earned Income Credit for the self-employed will increase by €200 from €950 to €1,150 for 2018. 

Home Carer Credit

The Home Carer Tax Credit will be increased by €100 to €1,200.

Return to:  Budget 2018 Analysis

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