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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 Band	USC Rate %
Employee	Up to €12,012	0.5%
	€12,012 - €19,372	2%
	€19,372 - €70,044	4.75%
	Over €70,044	8%
Self-Employed	Up to €12,012	0.5%
	€12,012 - €19,372	2%
	€19,372 - €70,044	4.75%
	€70,045 - €100,000	8%
	Over €100,000	11%

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.