Personal Taxes

Confirmation of Budget 2019 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: 

  • Widening the 2% band to €19,874 from €19,372 
  • Reducing the 4.75% USC rate to 4.5% 

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 2019. This results in a single person reaching the higher income tax rate at an income level of €35,300. 

The combined effect of the above measures is a reduction in the marginal rate of tax for those earning between €35,301 and €70,044 to 48.5%. 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 2019 are outlines below:

Income BandUSC Rate %
EmployeeUp to €12,0120.5%
€12,012 - €19,8742%
€19,874 - €70,0444.5%
Over €70,0448%
Self-EmployedUp to €12,0120.5%
€12,012 - €19,8742%
€19,874 - €70,0445%
€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%. 

BIK on Electric Vehicles

The exemption from BIK for electric vehicles is extended to 31st December 2021, however, the exemption will only apply to a vehicle with a market value not exceeding €50,000. Any amount in excess of €50k will be subject to the normal BIK rules.

Interest Deductibility on Rented Residential

With effect from 1st January 2019, a landlord will be entitled to deduct 100% of the interest on a loan used to acquire, improve or repair a rented residential property. 

Amalgamating USC and PRSI 

Last year, the Minister announced plans to establish a working group to plan the process of amalgamating USC and PRSI over the medium term – this working group was appointed in February 2018 and this work is on-going. 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 €1,150 to €1,350 for 2018. 

Home Carer Credit 

The Home Carer Tax Credit will be increased by €300 to €1,500. 

New Measures 

Rent a Room Relief 

There is currently an exemption from Income Tax for payments up to €14,000 in a year received by a person for renting a room in their main residence, known as rent-a-room relief. One of the amendments is to introduce a minimum rental period of 28 days to exclude short-term lettings from the relief. However, this provision will not affect the availability of the relief to the provision of accommodation for respite care, exchange students or five day a week digs. 

Other Measures

Other new amendments included the following: 

  • Exemption from BIK on the provision of accommodation and health care to members of the Permanent Defense Force 
  • Exemption from Income Tax for certain payments made under a scheme to compensate individuals infected with Hepatitis C or HIV 
  • Exemption from Income Tax for any payments received under S15 of the childcare Support Act 2018 and this income will be ignored when calculating their income for the purposes of the Income Tax Acts 
  • Exemption from Income Tax for payments made to women who were resident in certain adjoining institutions in the Magdalen Restorative Justice Ex Gratia scheme. There is a further exemption from Income Tax and Capital Gains for any income or capital gains earned from the investment or reinvestment of the awards. 

Return to Budget 2019 Analysis