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:
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 Band||USC Rate %|
|Employee||Up to €12,012||0.5%|
|€12,012 - €19,874||2%|
|€19,874 - €70,044||4.5%|
|Self-Employed||Up to €12,012||0.5%|
|€12,012 - €19,874||2%|
|€19,874 - €70,044||5%|
|€70,045 - €100,000||8%|
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%.
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.
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.
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.
The Earned Income Credit for the self-employed will increase by €200 from €1,150 to €1,350 for 2018.
The Home Carer Tax Credit will be increased by €300 to €1,500.
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 new amendments included the following:
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