Budget 2022 Individuals

Perspectives

Personal Tax 

Budget 2023

Key measures

In the area of personal income tax, a package valued at €1.1bn has been announced. The package includes the following measures:

  • The standard rate band for personal income tax (the amount of income that is subject to tax at the 20% rate) is to be increased by €3,200. This will mean the first €40,000 will be taxable at the 20% personal income tax rate.
  • The personal tax credit, employee tax credit and the earned income credit (all currently set at €1,700) will be increased by €75. The Home Carer tax credit for stay at home parents is to be increased by €100.
  • The Universal Social Charge is to be amended so that the ceiling for the second-rate band will increase from €21,295 to €22,920.
  • The exemption from the top rate of USC for medical card holders, and those aged over 70 earning under €60,000 will continue beyond 2022.
  • A new rent tax credit has been announced of €500 per year and applies to rent paid in 2022.
  • The deduction for pre-letting expenses for vacant residential properties has been enhanced by doubling the amount of the deduction to €10k per property and reducing the vacancy period from 12 months to 6 months.
  • A new Vacant Home tax is to be introduced subject to certain exemptions where properties are occupied for less than 30 days per year. The tax will be calculated at 3 times the property’s local property tax rate.
  • Some key farming reliefs that were due to expire at the end of the year have been extended.

Who will be affected?

Self-employed individuals, as well as employees will benefit from the personal income tax package announced. In addition, certain farming families will continue to benefit from targeted reliefs. Tenants will also benefit with the introduction of the rent credit. Property owners who have incurred pre letting expenses in relation to vacant residential properties will benefit positively but other property owners may be negatively affected by the introduction of the vacant home tax.

When? What to do now?

Most measures outlined are to be introduced in 2023 with the exception of the rental credit for tenants.

Our view

While the personal income tax measures which reduce the effective rate of tax for individuals is welcomed, it is disappointing that the budget did not go further this year to reform personal income tax to include a third tax rate band for middle income earners. However, the Minister promised a review in 2023 with a view to the introduction of any resulting changes by 2024. It is also intended in the medium term to undertake a broader review of Income tax, USC and PRSI to provide a roadmap for the future.

Finance Bill 2022: Key Provisions

Income

  • The rent credit will apply in relation to the 2022 to 2025 years of assessment (inclusive). The value of the tax credit is equal to the lesser of 20% of the qualifying payment made and €500, or €1,000 in the case of jointly assessed couples. Rental payments in respect of an individual’s PPR (renting a room in a landlord occupied home), a residence to facilitate work or college or residence of a child attending college will qualify for the relief.

CAT

  • Definitions of child has been updated to include individuals whose birth record includes a parent who is not their biological parent but who assumed the role of parent for that person. The corresponding definitions of social father, social mother or social parent are also included in definitions of mother, father, parent. An election must be made by the “affected person” beneficiary when taking a taxable benefit as to whether or not the relationship that arises by virtue of the incorrect birth record shall apply to that benefit and that election shall apply to other benefits taken from the same disponer.
  • There were some updates to the information required to be furnished when applying for a grant of probate including the power of the person applying for the grant of probate to request that a banker provide them with information in relation to property held by a deceased when requested to do so.
  • The exemption of certain receipts in s82 has been extended to include payments under Covid 19 Death in Service for Health Care Workers

Stamp

  • As announced in the Budget, the residential development refund scheme has been extended to include construction commencing up until 31 December 2025.
  • There have been further changes to the 10% rate of stamp duty on the acquisition of 10 or more residential properties.  These amendments have introduced an exemption for homes acquired under home reversion agreements and to provide for a partial refund where properties are registered as designated centres under the Health Act 2007 or children’s residential centres under the Child Care Act 1991.  Further, where houses are bought but sold within 12 months of acquisition for the purposes of affordable home arrangements, the Finance Bill has introduced a refund scheme for the stamp duty paid on acquisition (regardless of whether the acquisition was stamped at the 1%, 2% or 10% rate).  Both refund schemes are subject to Ministerial Commencement Order.
  • There have been some further changes to the provisions dealing with the operation of stamp duty on electronically traded securities to make it clear that written instruments are not caught by the provisions, to limit the obligation to keep records in certain cases and to update the obligations to align with other stamp duty provisions.
  • The Bill has provided for the commencement dates for the modernised system for the collection of stamp duty on financial cards and cheques as introduced in Finance Act 2021 (1 January 2023 and 1 January 2024).
  • The Bill provides for a modernised system of the collection of health insurance levies and makes that levy subject to the compliance provisions that apply to other stamp duty charges.
  • The Bill further extends the bank levy by a further year to 2023.

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