Taxation changes – Budget 2010

October 14th, 2008 - Pat Breen

• A Carbon Tax €15 / Tonne will apply immediately to the price of petrol (+3.5%) and diesel (+4.5%); from May 2010 to Heating Oil
(+8.5%) and Natural Gas (+6%); and to Solid Fuels (+11%) at a date yet to be decided.

Water Charges will be introduced or consumption above a free allocation, and a Tax on the Site Value of all homes in 2011.
• Under the Tax Credit system for Income Tax, Gross Tax minus Tax Credits = Tax Payable.
• Gross tax liability is calculated on your total income (after deduction of superannuation and permanent health benefi t) by
applying 20% to income up to your standard rate cut-off point and 41% on the remainder. The cut off point will be:
Standard Rate Cut-off Income 2010
Weekly 12 Month Value
Single/Widowed €700.00 €36,400
One Parent Family €776.92 €40,400
Married (one income) €873.08 €45,400
Married (two incomes) €1,400.00 €72,800
Separated spouses may be taxed singly or jointly.
If you rent rooms in your own home to an unconnected person and the annual rent is less than £10,000, the rent will be
exempt and subtracted from income before calculating tax, social insurance or health levy. If you care for up to 3 children in
your home and receive less then €15,000, this income will be exempt from tax and health levy but a minimum €253 Social
Insurance is payable. If you exceed these amounts, the exemption is lost and the whole lot is taxed.

• All of your Tax Credits are subtracted from this gross liability to yield the tax payable. The Tax Certificate will show the annual
value of all your credits and the equivalent weekly or monthly amount.

The main tax credits for 2010:-
Tax Credits 2010
Single Person €1,830 Age (65) Allowance (each) €325
Married Couple €3,660 Incapacitated Child €3,660
Widowed €2,430 Homecaring Spouse €900
One Parent Family €3,600 Dependent Relative €80
PAYE Allowance (each) €1,830
— The Homecaring Spouse Credit is available to a spouse in a one-earner family who is caring in the home for a child who is
eligible for Child Benefi t or for an aged or handicapped person. You must apply for this allowance. The homecarer is allowed to
have up to €5080 income of their own, thereafter the credit is reduced, reaching zero if income exceeds €6,620. Carer’s
Allowance is not counted as income in this means test.
— One Parent Family Credit applies to a single or widowed person if you can show that your child resided with you for at least
part of the year. This relief is not available to an unmarried couple living together
— Dependent Relative Credit is claimable if you support a widowed mother or incapacitated relative whose income does not
exceed the contributory OAP
— A parent with dependent children who is widowed gets an additional tax credit in each of the 5 subsequent tax years of
€4,000, €3,500, €3,000, €2,500 and €2,000 respectively.
• Tax credits which are unused are not refundable. They will be carried forward from week to week during a tax year, but if unused after the end of the tax year, they are lost.
• Age Income Exemption: If you are 65 or over and your total income does not exceed the following limits no income tax is paid:
Single/Widowed €20,000 Married €40,000 (plus €575 for each of fi rst two children, €830 each thereafter on a full year basis). If income does not greatly exceed these amounts, you can claim this exemption and pay 40% on the excess.
• Mortgage interest: Mortgage relief is now being phased out. New loans taken out before 1st July 2011 will get the full entitlement and loans taken out after that will get a declining portion of the relief until it ends entirely for new loans on 31st Dec. 2012. The full entitlement is:
— A new loan for a fi rst-time buyer qualifi es for seven years of relief on interest up to €10,000 (single), €20,000 (married) and is allowable at 25% for year 1 and 2, 22.5% for year 3, 4 and 5, and 20% in year 6 and 7.
— A new loan to trade up will get 7 fresh years of relief on the entire loan, but a loan to extend will only get
7 years relief on the “top-up” element of the loan. In both cases relief is on a maximum interest of €3,000 (S) and
€6,000 (M) and is capped at 15%.
A new concession allows those who are currently getting Mortgage relief are being allowed to hold it until 2017 even if their 7 years expires.
• Certain expenses carry a 20% Tax Credit:
• All unreimbursed Medical Expenses (including Nursing Home expenses); Maternity care; A
Psychological Assessment and Speech Therapy for children. You can also claim for the medical expenses of
a close relative or any incapacitated or elderly person regardless of their means. Routine Dental or Optical Care don’t qualify.
• Health Insurance This relief is now granted at source and deducted from your premium by the insurer.
• Insurance to cover long-term care costs in the event of serious disability, and to cover non-routine dental costs.
• Rent to a Private Landlord up to a maximum €2,000 (single), €4,000 (married/widowed), and if you are aged 55 or over up
to €4,000 and €8,000 respectively.
• College Fees of up to €5,000 for full or part-time undergraduate courses in Ireland or EU and for postgraduate courses in non-
EU countries as well.
• Local Bin Charge up to €400.
• Trade Union Subscription up to €350 (credited at source).
• Certain items are still allowable at your top rate of tax. These are:
• An Incapacitated Person or one or more of their family, can claim up to €50,000 to enable employment of a home help.
• Back to Work Tax Allowance if previously unemployed or on disability allowance for 12 months or more – of €3,810 plus
€1,270 for each child in year 1, and two-thirds of these allowances in year 2, one-third in year 3.
• Social Levies apply to gross incomes (less pension contributions and permanent health benefi t) as follows:
• Health 4% up to €75,036, 5% thereafter
• Social Insurance (full rate) 4.0% up to €75,036
• Social Insurance (self-employed) 3% all income
All workers are exempt from Social Insurance if they earn less than €352 per week. Employees on full rate PRSI do not pay
Social Insurance on the fi rst €127 of their weekly earnings. Reduced rate contributors do not pay on the fi rst €25 of their weekly
earnings. Medical Card Holders and Lone Parents on Social Welfare and persons earning less than €500 per week do not have to pay
Health levy. Persons over 66 pay Health levy, but no Social Insurance.
The New Income Levy applies to gross income (including interest) before deduction of pension contributions, capital allowances,
or any other reliefs.
• at 2% up to €75,036, 4% on the next €99,944 and 6% on the remainder.
An exemption applies to Medical Card holders; persons whose income is under €289 per week; and persons aged 65+
who pay no income tax. You can seek a refund at the end of the year if over-charged.
These three levies are to be replaced by a single levy in 2011 which will have no threshold, exemptions nor ceilings and apply to all sources of income (public sector or private, earned or unearned).

• Redundancy: You do not have to pay tax on Statutory Redundancy, on lump sums from a pension scheme, nor on termination
payments due to injury or disability. Tax is payable on any other lump sums but after the deduction of the more favourable of:
• €765 for each complete year in the job, plus €10,160 (if this is the more favourable option, a further €10,000 is allowable if you
are not a member of an Occupational Pension Scheme), or
• 1/15th of your annual income (average of the last 3 years) for each year less any tax-free lump sum from the pension scheme.
The balance is taxable either as extra income for that year or at the average rate of tax you paid in the previous years.
• Pension Contributions to pensions are free of Income Tax (and of PRSI and health levy for PAYE workers) up to
15% of gross earnings (under 30) rising in steps to 40% (60 years or over).
• If not in a Pension Scheme you may put the money into a Personal Retirement Savings Account (PRSA) where the fund
will accumulate free of tax on income or on gains. You cannot withdraw money before age 60. On retirement you may take
out 25% tax-free.
• If in a Pension Scheme you can top up contributions in your own Scheme or a linked PRSA by making tax free Additional
Voluntary Contributions (AVCs) up to the income ceiling and maximum benefi ts permitted by Revenue. You can spread back
AVC’s for up to 10 years to provide for dependant’s benefi ts.
• A Self Employed person can put contributions into personal pension schemes, in which there is no limit to the pension
or death benefi t, but the tax free lump sum at retirement is limited to 25% of the accumulated fund.
• DIRT Tax: Retention tax is increased to 25% for ordinary deposit accounts, 28% on life assurance or investment accounts.
Persons who are 65 and over, or permanently incapacitated, can, if your total income is not suffi cient to make you taxable, notify your bank and receive the interest without deduction of DIRT.
• Stamp Duty: Exempt from Stamp Duty are:
– All purchases by fi rst-time buyers.
– All new homes under 125m2 bought by owner-occupiers (bigger new homes pay at most a quarter of the full duty).
Other property purchased will be liable to Stamp Duty calculated on a progressive scale:
– First €125,000 nil – Next €875,000 7% – Balance 9%
• Capital Acquisitions Tax: Gifts or inheritance now bear a 25% tax on the market value of the assets received in excess of
certain thresholds, which vary according to your relationship with the giver as follows:
Relationship to Giver Exempt Threshold 2010
A. Son/Daughter €434,000
B. Grandchild/Brother/Sister/Niece/Nephew/Parent €43,400
Relationship other than Group A or B €21,700