Budget 2021 was delivered by Finance Minister Paschal Donohoe today. Below we highlight the main changes that could affect you.
- Small change to the second rate-band of Universal Social Charge which will increase from €20,484 to €20,687.
- Income tax bands and rates remain unchanged.
- The Dependent Relative Credit will increase from €70 to €245.
- The Earned Income Credit will increase from €1,500 to €1,650.
- Help to Buy Scheme July Stimulus measures to be extended to the end of 2021.
- Re-introduction of the 9% VAT rate for the hospitality and tourism sector from 1st November 2020 and will remain in place for all of 2021.
- Confirmation of the 12.5% rate of tax, but challenges lie ahead in the area of tax digitalisation.
- All Intangible assets acquired from 14th October 2020 will be within the scope of balancing charge rules.
- As part of the EU ATAD, 2021 will see the introduction of interest limitation and anti-reverse-hybrid rules.
- Technical adjustment to Exit Tax rules in respect of the operation of interest on instalment payments.
- Knowledge Development Box relief extended until end of 2022.
- Digital Gaming Tax Credit to encourage growth in this sector is likely to be introduced in 2022.
- Section 481 Film relief amended to provide for an additional year at its peak rate of 5% until 31 December 2023.
Climate Change Measures
- A Carbon tax increase of €7.50 per tonne will be applied to auto fuels from midnight tonight and all other fuels from 1st May 2021. This will bring Carbon tax to €33.50 per tonne/CO2 with the goal to achieve €100 per tonne by 2030.
- VRT – transition from CO2 based system to new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions test system from 1st January 2021. Used imports will have CO2 values adjusted to WLTP equivalent.
- Motor Tax – rates will remain unchanged for all cars in the engine size regime and all but the most pollutant cars in the post 2008 regime. Third table based on WLTP system from 1st January 2021.
- VRT Relief for Plug-in Hybrid Electric Vehicles and hybrids will expire.
- NOx surcharge bands to be adjusted so higher NOx emitting vehicles pay more.
- Accelerated Capital Allowances scheme for Energy Efficient Equipment extended for further 3 years. Categories of equipment to be updated.
- Consanguinity relief of 1% Stamp Duty rate on the transfer of Agricultural Land between family members is extended until 31 December 2023.
- The 1% Stamp Duty rate on farm consolidations is extended until end of 2022.
- Farmers’ flat VAT rate increase from 5.4% to 5.6% from 1 January 2021.
- Capital Acquisitions Tax and Capital Gains Tax remain at 33%.
- No change in Capital Acquisitions Tax thresholds.
- CGT – Entrepreneur Relief ownership test slightly changed so that the shares must be held for a continuous period of any three years prior to disposal. Previously it was 3-year continuous period in the 5 years immediately prior to disposal.
COVID-19 Support Measures
- Covid Restrictions Support Scheme (CWSS) for businesses significantly impacted (at least 20% reduction on corresponding period in 2019) or temporarily closed and where Level 3 or above restrictions prohibit or restrict access by customers. Cash payment from Revenue Commissioners as an advance credit for trading expenses for the period of restrictions. Payments will be calculated based on 10% of the first €1m of turnover and 5% thereafter, based on the average ex VAT Turnover for 2019. The maximum weekly payment will be €5,000. Scheme will run until 31 March 2021.
- Self Employed may avail of the Debt Warehousing provisions to defer payment of their 2019 Income Tax balance and preliminary tax for 2020. Payments are deferred for a year without interest applying and at a rate of 3% interest thereafter and will attract no surcharge.
- EWSS, or similar type scheme, likely to continue beyond March 2021.
- Commercial rates waived.
- New European investment fund to be established to invest in domestic, high innovation enterprises.
- In addition to the change in USC rate band, the weekly threshold for the higher rate of employers’ PRSI is to increase from €394 to €398.
- Excise duty on Tobacco products to increase by 50 cents.