If you’re hoping for a substantial boost to your income on the back of Budget 2019 you may be left wanting.
The context for this year's budget, to be delivered by Minister for Finance Paschal Donohoe at 1pm on Tuesday, is that the Government has committed itself to running a balanced budget for 2019. This is against calls for the Government to run a surplus this year, particularly given the risks posed by Brexit.
The narrow parameters of the budget have been set from months back. The Government has a “fiscal space” of at least €800 million, and it is committed to allocating the money on a two-to-one basis in favour of spending over tax cuts.
Parental leave, for both mothers and fathers, is expected to increase by two weeks from next year
However, revenue-raising measures, such as increasing tax on diesel or stamp duty for example, or raising the VAT rate on the hospitality sector, could widen the spending pot available.
So what might come out in the Minister for Finance’s speech?
WHAT LOOKS LIKELY TO HAPPEN
Christmas bonus: The Government is expected to fully restore the Christmas bonus for all social welfare recipients. The bonus payments were cut during the austerity years. It was restored to 85 per cent last year. It will now be a double payment.
Up in smoke: The price of a packet of cigarettes will go up. Last year it was by 50 cent, so it will probably rise by this amount again.
Personal tax savings: The threshold at which taxpayers pay the higher 40 per cent rate of tax will be raised, although the amount has not yet been announced. The threshold is currently at €34,550 for a single person and €43,550 for a married couple with one earner. Taoiseach Leo Varadkar says he wants to raise the threshold to €37,500 for a single person and €46,500 for a married couple with one earner by 2020. An increase of about €750-€ 1,000 is seen as likely but the savings will be minimal. An increase of €1,000 would give someone back about €200 a year, or just € 4 a week.
Increase in VAT: The special VAT rate for the hospitality sector is set to increase from 9 per cent to up to 13.5 per cent despite resistance from some TDs in the Independent Alliance to a blanket increase.
Carbon tax: This is seen as certain to rise. At present it is priced at €20 per tonne, which has remained the same since May 2014, with talk of an increase to €30 being mooted. This will lead to an increase in the cost of petrol, diesel, heating fuel and solid fuel. The cost of a bag of coal, for example, will increase by €1.
Diesel rise: An increase in excise on diesel is likely to come on top of the carbon tax increases. The increase in excise would bring diesel prices closer to those of petrol. However, it seems that Independent Alliance TDs conceded an increase in the VAT rate for the hospitality sector in order to avoid a rise of as much as 10 cent per litre on diesel.
Granny flat grant: A grant of about €15,000 could be made available to incentivise older people to convert part of their homes into rental accommodation with separate access.
State pension: There could be a €5 increase in the weekly pension, and other welfare payments, as it is being sought by Fianna Fáil. Such increases would likely not kick in until March 2019.
Boost for self-employed: The Government is expected to increase the earned income credit by about € 250 to €1,400.
Prescriptions: The threshold for the drugs payment scheme is expected to drop by € 10 per month to €124. Medical card holders are also expected to see a cut in prescription charges of €0.50 to €1.50 per item.
Homeowner costs: Mortgage interest relief will be cut to half of its original rate in 2019, and will fall again to 25 per cent in 2020 before being phased out entirely. The Government believes mortgage interest relief has a distorting effect on house prices.
Increase in training costs: Businesses will have to pay more into the National Training Fund next year. The levy will rise from 0.8 per cent to 0.9 per cent.
Extra parental leave: Parental leave, for both mothers and fathers, is expected to increase by two weeks from next year.
Less tax for savers: Dirt on savings fell to 37 per cent this year and the Government has committed to cutting it to 33 per cent by 2020, to bring it in line with capital gains tax (CGT). This means that Dirt will fall to 35 per cent from 2019, while the Government could also look at bringing exit tax, currently levied at 41 per cent, more in line with Dirt.
Increase in stamp duty: Given the sharp uptick in the sale of multi-unit residential blocks to property funds, Government could look at increasing stamp duty on the sale of such units to boost revenues.
WHAT MIGHT HAPPEN
USC cut: Cutting USC was a key Fine Gael manifesto pledge, so this could be tweaked – but doing so will be expensive. The 5 per cent rate, which applies to income of € 50,672 and more, was cut back to 4.75 per cent last year, and may be cut by a further 0.25 per cent.
Housing: Local authorities will get new powers to build social housing. The threshold for one-stage approvals for building social housing from the Government, currently there are four stages, will rise from developments worth €2 million to developments worth €7 million.
Help to Buy II: The Government may come up with a scheme which would top up the savings by first-time buyers for a deposit. A similar scheme which amounts to a 25 per cent top-up exists in the UK.
Inheritance tax: No change was made to Ireland's inheritance tax regime last year despite a commitment to bring the tax-free parent/child group threshold back up to about € 500,000. It currently stands at € 310,000 and, against a background of rising property prices, has been criticised as being too low.
Fair Deal: This scheme, which covers the cost of nursing home care, might be overhauled to favour farmers and small business owners.
More relief for entrepreneurs: Currently at €1 million, capital gains tax relief is seen as significantly way off the €10 million equivalent threshold in the UK, and there have been calls to increase it.
Property tax: A change is definitely coming, but it may not come on budget day. Donohoe has signalled that any changes to the current property tax regime won't kick in until 2020, so a statement may not be made until after budget day.
Boost for landlords: The Government could ease the tax burden on landlords by increasing the amount of mortgage interest which is tax deductible, up from 85 per cent at present.
