Personal Taxes

As anticipated, Minister Donohue did not announce any changes to tax rates or bands. The majority of tax credits remain unchanged with the exception of an increase of €100 in the Home Carers Tax credit from €1,500 (2019) to €1,600 (2020). The earned Income tax credit for the self-employed has been increased by €150 from €1,350 (2019) to €1,500 (2020). 

Similarly, there were no changes announced in relation to USC other than an extension of the reduced rate of USC for medical card holders for one year up to 2020 – this reduced rate applies where the total income of the individual is €60k or less.

Unfortunately, the marginal rate of tax for those earning between €35,301 and €70,044 remains at 48.5%, while 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 2020 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%

Finance Act 2017 introduced a phased reduction in the rate of DIRT applied to interest earned on deposit accounts. For 2020, there is a further reduction of 2% in the DIRT rate to 33%.

Employer PRSI is to increase by 0.1% in 2020 to 11.05% which allows for an additional contribution to the National Training Fund.

In addition to the above, a number of Income Tax exemptions were introduced in relation to the following payments: 

  • Training allowance payments made in accordance with a relevant scheme approved by the minister for Education and Skills. 
  • Certain payments made on behalf of the Child and Family Agency (TUSLA) to carers, foster parents relatives and young person’s transitioning for care 
  • Compensation Payments made to individuals who donate a lobe of a liver 
  • Grants made on behalf of the Minister for Education and Skills in respect of student grants in accordance with the Student Support Act 2011.

Dividend Withholding Tax (‘DWT’)

The legislation has been amended to ensure that the new rate of Dividend Withholding Tax (‘DWT’) of 25% will apply to distributions made on or after 1 January 2020. Interestingly, there is no provision made for now regarding the movement to real time DWT rates linked to the PAYE system, the details of which we expect will follow in due course at a later date following further consultation/review.

Return to Budget 2020 Analysis.