Personal

Debt Warehousing

Minister Donohoe announced an extension of the debt warehousing provisions in respect of self-employed taxpayers. Under the provisions, payment of the 2019 income tax balance and 2020 preliminary tax liabilities can be deferred for a year with no interest applying; a 3% interest charge will apply thereafter. No surcharge will apply.

Universal Social Charge (USC)

The ceiling of the second USC rate band will be increased from €20,484 to €20,687.  Accordingly, USC Rates & Bands from 1 January 2021 will be as follows: 

€0 – €12,012 

0.5% 

€12,012 – €20,687 

2%

€20,687 – €70,044

4.5%

€70,044+ 

8%

Self-employed income over €100,000    

3% surcharge

Annual incomes up to €13,000 continue to be exempt from USC and the reduced rate USC for medical card holders is being extended for a further year.

Tax Credits 

Equalising the earned income tax credit with the PAYE credit, the Earned Income Credit will increase from €1,500 to €1,650. The increased credit will also be applied for the 2020 tax year.

The Dependent Relative Tax Credit will increase from €70 to €245.

The Sea-going Naval Personnel Tax Credit has been extended and increased from €1,270 to €1,500. 

Remote Working

Recognising that remote working has been an essential part of our response to the pandemic, Minister Donohoe outlined the government's commitment to develop a strategy for remote working. He also highlighted current provisions for remote workers including: 

  • A contribution of €3.20 a day towards expenses can be paid to employees working remotely without a benefit-in-kind arising.
  • Where the employer does not contribute, the remote worker may make a claim for tax relief for utility expenses such as heat and light. The Minister confirmed that from 2020, this may include the cost of broadband. Revenue guidance will confirm the position.
  • Remote workers can also claim relief for any other vouched expenses incurred “wholly, exclusively and necessarily” in the performance of the duties of their employment.

Capital Gains Tax (CGT) - Entrepreneur Relief

This relief provides for a reduced 10% rate of CGT on certain disposals of "chargeable business assets" which, subject to certain qualifying conditions, may include ordinary shares. Previously, an individual was required to own a minimum 5% shareholding for a continuous period of three years in the five years immediately prior to the disposal. The changes announced in Budget 2021 amend this requirement so that an individual who has owned a 5% shareholding for a continuous period of any three years may qualify for the relief.



For further information on Budget 2021, please contact Brian Duffy or your usual William Fry Tax contact.