Budget 2011

The main Budget changes which may affect people living in Ireland are set out below.

This document sets out changes in the areas of social welfare, tax, health, transport, environment, housing, education, employment and other areas. It is an overview and not a complete statement of the measures announced in Budget 2011. The document will be expanded and updated as information becomes available.

Some of the changes announced in the Budget come into effect immediately. Others take effect from the beginning of January 2011. Many others have to be finalised before coming into effect. Some elements of these measures may change when the Finance Bill is published – this is expected in early 2011.

For a full list of the Budget changes, please read the Department of Finance’s Summary of Budget Measures.

Rates of payment

Older people

There will be no change in the rates of State pensions or other payments for those aged over 66, for example, Living Alone Allowance, Household Benefits Scheme and Fuel Allowance.

People of working age

The maximum personal rate of payment for all weekly schemes will be reduced by €8 per week, except for personal rates for those aged 66 and over, and Invalidity Pension and State Pension Transition recipients aged 65. Changes will come into effect from the first week in January 2011.

Associated maximum Increase for a Qualified Adult will generally decrease by €5.30 per week from the first week in January 2011.

Proportionate decreases will apply to both personal rates and Increase for a Qualified Adult in respect of people on reduced social insurance rates of payment.

There will be a decrease of €8 per week in the maximum and minimum rate of Maternity and Adoptive Benefits.

There will be a reduction of €6 per week in the rate of Jobseeker’s Allowance and Supplementary Welfare Allowance for those aged 22-24.

The rate of payment of Jobseeker’s Allowance and Supplementary Welfare Allowance for those aged 18-21 is unchanged.

There will be a reduction of €10 in the personal weekly rate of Supplementary Welfare Allowance.

Fuel Allowance

In response to the current severe weather, a once-off additional 2 weeks payment will be paid to most recipients in the next few weeks, with the remainder of recipients getting this payment in early January. This measure will be worth €40 to recipients.

Children

Child Benefit will be reduced by €10 per month from January 2011 on both the lower and higher rate with an additional €10 per month decrease for the third child. Grants for multiple births (twins etc.) will not be reduced.

Other child-related payments are unchanged: Qualified Child Increases, Family Income Supplement, Back to School Footwear and Clothing Allowance, Widowed Parent Grant and Domiciliary Care Allowance.

Carers

The rate of payment will be reduced by €8 for carers aged under 66. Carers aged 66 or over will not be affected.

There are no other changes to Carer’s schemes: the half-rate payment, the additional payment for caring for more than one person and the Respite Care Grant are retained.

Rent Supplement

The Rent Supplement Scheme will be reformed in order to control expenditure. This will include an additional €2 per week contribution by certain welfare recipients towards the cost of rent. This follows from the reduction in the rate of Supplementary Welfare Allowance.

Treatment Benefits

The Treatment Benefit Scheme will continue to be limited in 2011 to the Medical and Surgical Appliances scheme and the free examination elements of the Dental and Optical Benefit schemes.

Other measures

There will be a reduction in expenditure on Departmental administration. A range of other measures relating to control, eligibility and structural reform will be announced at a later date.

Jobseeker's Allowance

The rates below relate to claimants who have no assessable means.

The full rate of Jobseeker’s Allowance will be paid to qualified claimants aged under 25 where they either have dependent children or are participating in an approved education or training course.

Supplementary Welfare Allowance

The rates below relate to claimants who have no assessable means.

The full rate of Supplementary Welfare Allowance will be paid to qualified claimants aged under 25 if they have dependent children or are participating in an approved education or training course.

The full rate of Supplementary Welfare Allowance will be paid to qualified claimants aged under 25 if they have dependent children or are participating in an approved education or training course.

Summary of rates

Social Insurance Payments

Income tax: tax credits

*Age credits and exemptions are being abolished over 4 years.

Income tax: tax bands

*The maximum that can be transferred between spouses is €45,400 in 2010 and €41,800 in 2011.

Income tax: age exemption limits*

*Age credits and exemptions are being abolished over 4 years.

Relief for Energy Efficiency Measures

A new scheme will be introduced to encourage individuals to make their homes more energy efficient – relief will be given up to a maximum expenditure of €10,000 at the standard rate of income tax. Credit will be given in the following tax year.

Abolition of reliefs

Rent Relief will be phased out over 8 years.

Tax relief for trade union subscriptions will be abolished from 1 January 2011.

Tax exemption from Benefit in Kind (BIK) for employer-provided childcare will be abolished from 1 January 2011.

Tax relief on subscriptions to professional bodies will be abolished from 1 January 2011.

Patent Royalty Exemption is abolished, effective from the launch of the National Recovery Plan on 24 November 2010.

Tax relief on Loans to Acquire an Interest in Certain Companies will be abolished from 1 January 2011.

Accelerated capital allowances for farmers who incur capital expenditure on farm buildings and structures for use in the control of pollution will be abolished from 1 January 2011.

Capital expenditure on new machinery and plant for use in mining will be abolished from 1 January 2011.

The Approved Share Options Scheme is abolished, effective from the launch of the National Recovery Plan on 24 November 2010.

Tax relief for new shares purchased by employees will be abolished from 1 January 2011.

Exemption from tax in respect of grants or payments to the National Co-Operative Farm Relief Services Limited will be abolished from 1 January 2011.

Section 23 relief will be restricted to rental income from Section 23 property.

A number of other property-based reliefs are also being abolished on a phased basis. For further details see budget.gov.ie.

Rent Tax Relief

Claimants who were not renting at 7 December 2010 and who subsequently enter into a rental agreement will not be able to claim relief.

Restriction of reliefs (income tax / Universal Social Contribution / PRSI) (from 1 January 2011)

There is a restriction of the tax-free element of ex-gratia termination payments to €200,000 so that payments above this amount will be subject to tax at the marginal rate. This change will apply with effect from 1 January 2011.

From 1 January 2011 there is a limit of €200,000 on the amount of the tax-free retirement lump sum. Lump sum payments above that limit will be taxed as follows:

The ceiling on the tax exempt earnings of artists is being reduced from €250,000 to €40,000.

Other restrictions of reliefs are also being brought in from 1 January 2011. For further details see budget.gov.ie.

Universal Social Charge (USC)

The Health Levy and the Income Levy will be abolished and replaced by a new Universal Social Charge from 1 January 2011, at the following rates and thresholds:

People aged 70 or over will pay the Universal Social Charge at a maximum rate of 4%, irrespective of income.

Social welfare payments (payments from the Department of Social Protection) and similar payments are exempt from the USC.

Medical card holders who are currently exempt from the income levy may have to pay the USC.

You can find out more about the Universal Social Charge in Revenue's Frequently Asked Questions document (pdf).

PRSI

The PRSI ceiling of €75,036 will be abolished.

The Class S (Self-Employed) PRSI rate will be increased from 3% to 4%.

Modified PRSI rates (applicable to certain public servants) will be increased to 4% on incomes in excess of €75,036.

A 4% PRSI charge for certain Office Holders will be introduced.

Deposit Interest Retention Tax and Exit Taxes on Life Assurance Policies and Investment Funds

The rate of retention tax that applies to deposit interest, together with the rates of exit tax that apply to life assurance policies and investment funds, will be increased by 2% and will now be 27% for payments made annually or more frequently and 30% for payments made less frequently than annually.

The increased rates will apply to payments, including deemed payments, made on or after 1 January 2011.

Stamp duty on transfers of residential property

The rate for transfers of residential property will be reduced to 1% on properties valued up to €1 million. For properties valued at more than €1 million, 1% will be charged up to €1 million and 2% will be charged to amounts over €1 million. This applies in respect of instruments executed on or after 8 December 2010.

Various reliefs and exemptions will be abolished in respect of instruments executed on or after 8 December 2010:

• First time buyer relief
• Exemption for new houses under 125 sq m in size
• Relief on new houses over 125 sq m in size
• Consanguinity relief for residential property transfers
• Exemption for residential property transfers valued under €127,000
• Site to child relief

Capital Acquisitions Tax

The current group tax free thresholds are being reduced by 20%. This reduction applies in respect of gifts or inheritances taken from midnight on 7 December 2010.

The new thresholds from 8 December are:

Excise duty

Tax will be increased by 4 cent per litre on petrol and 2 cent per litre on diesel (both inclusive of VAT) with effect from midnight on 7 December 2010.

Changes are also being made to Air Travel Tax and Vehicle Registration Tax (see below).

National minimum wage

The national minimum wage rate is to be reduced by €1 per hour as stated in the Memorandum of Understanding of the EU/IMF Programme of Financial Support for Ireland. This reduced rate will not apply to existing employees as a reduction in their wages would be a change to their terms and conditions of employment.

Relevant Contracts Tax

Relevant Contracts Tax applies to contractors in the construction, meat-processing and forestry sectors of the economy. To foster compliance, a new withholding rate of 20% will apply to subcontractors registered for tax with an established compliance record, with the existing 35% rate retained for subcontractors not registered for tax.

Three-year tax exemption for start-up companies

This scheme is being extended to include start-up companies which start a new trade in 2011. The scheme is being modified so that the value of the relief will be linked to the amount of employers’ PRSI paid by a company in an accounting period subject to a maximum of €5,000 per employee. If the amount of qualifying employers’ PRSI is lower than the reduction in corporation tax liability otherwise applicable, relief will be based on the lower amount

The Business Expansion Scheme will be transformed into the Employment and Investment Incentive with an increase in the amount that companies can raise under the scheme.

Employment-related tax reliefs abolished from 1 January 2011

• Tax relief for trade union subscriptions
• The tax exemption from Benefit in Kind (BIK) for employer provided childcare
• Tax relief on subscriptions to professional bodies
• Approved Share Options Scheme, effective from the launch of the National Recovery Plan on 24 November 2010
• Tax relief for new shares purchased by employees

Labour market activation

• Refocus the National Employment Action Plan to provide opportunities for education, training and work experience placements
• Additional 15,000 activation places and supports for the unemployed
• Extension of Employer Job (PRSI) Incentive Scheme to end 2011

Pensions

Social welfare pensions

There will be no change to social welfare pension rates.

Tax relief on pension contributions

The annual earnings limit on which pension tax relief is applicable is being reduced from €150,000 (2010) to €115,000 for 2011.

Employee pension contributions

Employee contributions to occupational pension schemes and other pension arrangements will be subject to employee PRSI and the Universal Social Charge from 1 January 2011

Public service pension-related deduction

The pension-related deduction charged to earnings in the public service will be subject to employee PRSI and the Universal Social Charge from 1 January 2011.

Employer PRSI exemption on pension contributions

The current employer PRSI exemption for employee contributions to occupational pension schemes and other pension arrangements will be reduced by 50% from 1 January 2011.

Maximum allowable pension funds

The maximum allowable pension fund on retirement for tax purposes (known as the Standard Fund Threshold (SFT)), is to be set at €2.3 million with effect from 7 December 2010. A higher threshold may apply if, on 7 December 2010, the capital value of an individual’s pension rights drawn down on or after 7 December 2005 (i.e. crystallised pension rights) when added to any uncrystallised pension rights the individual may have, as valued on 7 December 2010, are greater than €2.3 million and lower than €5,418,085 which is the current value of the SFT. This change will apply with effect from 1 January 2011.

Approved Retirement Funds

The annual imputed distribution which applies to the value of assets in an Approved Retirement Fund (ARF) at 31 December each year is being increased from 3% to 5% in respect of asset values at 31 December 2010 and future years. This change will apply with effect from 1 January 2011.

Retirement lump sums

The overall life-time limit on the amount of tax-free retirement lump sums that an individual can draw down from pension arrangements is being reduced to €200,000. Lump sums over €200,000 will be taxed at the standard income tax rate (currently 20%) up to €575,000 (25% of the new Standard Fund Threshold). Anything over this amount will be taxed at the taxpayer’s marginal rate of income tax.

Tax-free retirement lump sums taken on or after 7 December 2005 will count towards “using up” the new tax free amount so that if a person has already taken tax free retirement lump sums of €200,000 or more since 7 December 2005, any further retirement lump sums paid to them on or after 1 January 2011 will be taxable. These earlier lump sums will also count towards determining how much of a lump sum paid on or after Budget day is to be charged at the standard or marginal tax rate. This change will apply with effect from 1 January 2011.

Extension of flexible options on retirement

All members of defined contribution pension arrangements will have access to flexible options on retirement in respect of the main benefits arising from those schemes, subject to certain conditions. These will be provided for in the Finance Bill.

You can find out more about the pension changes in Revenue's Frequently Asked Questions document (pdf).

Housing

Tax relief for energy efficiency measures

A new scheme will be introduced to encourage people to make their homes more energy efficient. Relief will be given at the standard rate of income tax on expenditure up to a maximum of €10,000. Credit will be given in the following tax year.

Rent relief

Tax relief for tenants of private rented housing will be phased out over 8 years. This is the same timeline as was previously announced for Mortgage Interest Relief.

Stamp duty

The rate of stamp duty for transfers of residential property will reduce to 1% on properties valued up to €1 million. A rate of 2% will apply to amounts over €1 million. The new rates will apply to property transfers on or after 8 December 2010.

All existing reliefs and exemptions for stamp duty on residential property are being abolished in respect of instruments executed on or after 8 December 2010, as follows:

• First-time buyer relief
• Exemption for new houses under 125 sq m in size
• Relief on new houses over 125 sq m in size
• Consanguinity relief for residential property transfers
• Exemption for residential property transfers valued under €127,000
• Site to child relief

A transitional provision will be put in place to ensure that anyone who has entered into a binding contract to purchase a residential property before 8 December 2010, and who executes the transfer of that property before 1 July 2011, will not lose out.

Tenant Purchase Scheme

A higher discount is being introduced in the short term for existing local authority tenants who wish to purchase their homes under the Tenant Purchase Scheme.

Household charge

A flat rate “household charge” will be introduced in 2012 as an interim measure. It will be followed in 2013 by a final Site Value Tax, which will be introduced when valuations have been completed.

Water metering

The National Recovery Plan 2011-14 also provides for the roll-out of water metering to domestic users, with water charges to follow on a metered basis alongside a free allowance.

Travel and Recreation

Tax on petrol and diesel

Tax will be increased by 4 cent per litre on petrol and 2 cent per litre on diesel (both inclusive of VAT) with effect from midnight on 7 December 2010.

Passports

Passport fees are to be introduced for those aged 65 or over.

Vehicle Registration Tax (VRT)

The car scrappage scheme is being extended for the period 1 January to 30 June 2011. VRT relief of up to €1,250 will be provided where a car of 10 years or older is scrapped in accordance with certain criteria and a new car of emissions bands A or B (i.e. with CO2 emissions of 140g/kg or less) is purchased.

The VRT relief for series production hybrid and flexible fuel vehicles, due to expire on 31 December 2010, is being extended for 2 years until 31 December 2012, with the rate of relief provided being up to €1,500.

Light commercial vehicles charged VRT at the Category C VRT rate of €50 will, from 1 January 2011, be charged the Category B rate of 13.3% of the Open Market Selling Price (OMSP).

Travel tax

A single revised rate of air travel tax of €3 will replace the existing two-rate structure on a temporary basis from 1 March 2011.

Growth Incentive Scheme for airlines

The Dublin Airport Authority (DAA) is to introduce a new Growth Incentive Scheme for airlines operating at Dublin, Cork and Shannon Airports. The Scheme, which will provide a full rebate of airport charges in respect of traffic at all three airports above an annual threshold of €23.5m, is to encourage overall traffic passenger growth at the airports.

Offshore betting

It is intended that all bookmakers taking bets from Ireland will pay 1% betting duty on those bets in the same way that betting shops currently do.

School transport

The school transport charge for post-primary students increases by €50 to €350 per year, with a maximum charge of €650 per family.

A new charge of €50 is introduced for primary school pupils, except for medical card holders , with a maximum charge of €110 per family.

The charges are subject to an overall maximum charge of €650 per family.

For the school year 2011/2012, the distance criteria will be applied to all pupils attending primary schools. This means that children who live less than 3.2 kilometres (2 miles) from school, and who get free transport under the “closed school” rule at present, will lose their transport eligibility.

Services for very small numbers of pupils will be discontinued. A minimum of 10 eligible children (up from 7 at present) will be required to establish or retain services.

Further changes arising from the recent Value for Money review will take effect from a later date.

Capitation grants

There is a 5% reduction in all capitation grants, including grants for adult literacy, community education, the School Completion Programme and Youthreach.

Student charges

The Student Services Charge for third-level students is replaced by a flat-rate higher education student contribution of €2,000 per year. Arrangements will be made to provide that second and subsequent siblings from a single family will not have to bear the full increased cost of the new €2,000 charge.

It is intended that this contribution will be payable in two instalments. Students qualifying for third-level grants will not have to pay it.

A new charge of €200 per year is introduced for Post-Leaving Certificate (PLC) students. Students qualifying for maintenance grants will not have to pay this charge.

Student Support Scheme

The rates of the following grants are reduced by 4% in line with the reductions in all Department of Social Protection (DSP) working-age payments

• Higher Education Grants Scheme
• Vocational Education Committees' Scholarship Scheme
• Third Level Maintenance Grants Scheme for Trainees
• Maintenance Grants Scheme for Students Attending Post-Leaving Certificate Courses

It is expected that these reduced rates will apply to the remaining portions of grants for the current academic year that are due to be paid in 2011.

The benefits payable to mature students will be limited to those payable to ordinary students. Mature students will no longer be automatically eligible for the non-adjacent rate of grant.

The proportion of students qualifying for the non-adjacent rate of grant will be reduced by changing the qualifying distance between the student’s home and college from 24km to 45km. It is expected that these changes will take effect from the 2011/2012 academic year.

Funding of third-level institutions

There is a 5% cut in the non-pay grant to institutions such as universities and institutes of technology.

Education for Travellers

Senior Traveller Training Centres (STTCs) will be phased out by June 2012. Replacement further education places, prioritised for Travellers, will be provided under the Back to Education Initiative (BTEI). This means that there will be no new enrolments in STTCs from 1 January 2011.

National Educational Psychological Service (NEPS)

The number of psychologists employed by NEPS will be capped at the current level of 178.

FÁS payments

All weekly training allowances and similar support payments paid through FÁS are reduced by €8 in line with the reductions in all Department of Social Protection (DSP) working-age payments.

The long-term unemployment bonus paid to students on the Vocational Training Opportunities Scheme (VTOS) is reduced from €31.80 to €20 per week.

Labour market activation programmes

The National Employment Action Plan will be refocused to establish clearer pathways to employment by ensuring that State agencies interact early and often with those who have lost their jobs to provide opportunities for education, training or work experience placements as appropriate.

An additional 15,000 activation places and supports for the unemployed will be provided under the following programmes:

• A new Skills Development and Internship Programme will provide up to 5,000 places in the private sector.
• The Work Placement Programme will provide up to 5,000 places in the public service. The scheme was recently extended in the Education sector and will be extended further within other sectors over the coming months.
• A new Community Work Placement Scheme will provide up to 5,000 additional places in the community and voluntary sector. Participants will work 19.5 hours a week for 12 months and their rate of payment will be the maximum rate of their social welfare payment plus a weekly €20 top up.

Health

Hospital charges

There are no increases in the Accident and Emergency (A&E) charge, the statutory day and inpatient charges, or the monthly threshold for the Drug Payment Scheme.

Charges for Private/Semi Private Treatment in Public Hospitals

If you are in a private bed in a public or voluntary hospital, you must pay the set rate which changes from time to time. The following charges are in addition to the public hospital in-patient charges.

The increase in these charges is as follows:

Income supports

The supplementary Blind Welfare Allowance paid to blind people who receive the Blind Pension has been reduced to €58.50 from €61.00 for a blind pensioner and from €122.00 to €117.00 for a blind couple.

Disability and mental health

There will be a maximum reduction of 1.8% in the Budget allocation for the two sectors.

An additional €10 million funding will be provided to the HSE for disability in 2011. This is to meet anticipated extra demand for emergency residential, respite and personal assistant/home support hours for people with disabilities and day places for school leavers in September 2011.

An additional €1m has been provided for suicide prevention. The National Office for Suicide Prevention (NOSP) will target:

• Development of the number and range of training and awareness programmes
• Improvements and standardised responses to deliberate self harm
• Development of the capacity of primary care to respond to suicidal behaviour and consider new models of response
• Ensuring that helpline supports for those in emotional distress are coordinated and widely publicised

Older people

Additional funding of €8m for Home Care Packages for approximately 500 extra recipients at any one time, or up to 800 during the year 2011.

An additional €6m for the Nursing Homes Support Scheme (Fair Deal Scheme) was announced. This funding takes account of the increasing number of older people that require long-term nursing home care due to demographic trends.

Miscellaneous

Public service

The Taoiseach’s salary will be reduced by €14,000, that of the Tánaiste by €11,000 and the salaries of Ministers by €10,000. The system of State cars will be reformed to include a pool system for Ministers based in Dublin. Ex- office holders, such as former Taoisigh will also have a pooling arrangement. One of the two Government jets will be disposed of.

New entrants to the public service will start at the lowest point of the revised pay scale. This scale is 10% lower than that currently in operation. In future, there will be a cap of €250,000 on salaries in the public service and in semi-State organisations.

There will be cuts in all public service pensions. The cuts will apply to existing beneficiaries.

New Four-Year National Solidarity Bond

It is proposed to introduce a new, four-year, National Solidarity Bond to complement the ten-year National Solidarity Bond which was launched last year. The bond will pay a coupon each year and a bonus for those who hold the bond to maturity. The bond will be sold by An Post on behalf of the National Treasury Management Agency (NTMA). Further details will be announced by the NTMA in the New Year.