Personal Tax

Key measures

In the area of income tax, the following measures were announced: 

• The rent tax credit has been extended for a further three years to the end of 2028. 
• The 2% USC rate band increasing by €1,318 to €28,700. The reduced rate of USC that applies to medical card holders earning less than €60,000 per year has been extended to end of 2027. 
• Mortgage interest relief will be extended for a further two years with a reduced value applying in final years. 
• The income tax deduction for small landlords for retrofitting properties will be extended for a further three years. 
• For farmers, the Farm Consolidation Stamp Duty relief, Farm Restructuring CGT relief and the Young Trained Farmer Stamp relief had been extended to the end of 2029. The scope of Farm Restructuring Relief has been expanded to include woodlands and forestry. Furthermore, the accelerated capital allowance scheme for slurry storage facilities has been extended for four more years. 
• It was announced that the Finance Bill will address the tax treatment of Auto Enrolment Retirement Savings Scheme on the death of the participant. Detail to follow. 
• The rate that applies to Irish regulated funds, their offshore equivalents and foreign life assurance products will be reduced to 38% from 41%. A roadmap to be published early next year on how to simplify the reporting of various types of investments such as offshore funds / savings accounts.  

Who will be affected and when?

There was a focus on housing in this budget which can be seen in the extension of the rent tax credit, mortgage interest relief and reliefs for landlords. However, an unexpected reduction in the tax rate applying to certain types of funds will be welcomed by individual investors and brings those rates in closer alignment to the general rate of capital gains. 

What now?

Most measures outlined are to be introduced in 2025 (with the exception of the increase in the rent tax credit for 2024) with some measures extended to 2027.

Our view

It was highly publicised in the lead up to the budget that there would be limited personal tax changes and thus there are no surprises here. For the first time in a number of years there was little changes to personal tax credits or the standard rate bands. There is a modest benefit for workers this year following the announcement of the increase in the 2% USC rate band.  However, the extension of mortgage interest relief and the rent tax credit recognises the ongoing pressures in the housing market and workers and families may also benefit from same. 

It was announced in last year’s budget that there would be a review of the tax regime on funds and other investments and thus the announcement today was welcome news to finally see a reduction in the rate applied to Irish and offshore funds. It is also positive that a roadmap will be published next year with a plan to simplify the reporting of various types of investments and make it easier for taxpayers to be compliant. 

In relation to inheritance planning, it is surprising that there were no changes to CAT thresholds or reliefs to assist families with passing assets to their children given the increase in property values. However, the reliefs available to farmers in passing their farms to the next generation have been extended until 2029.