Budget 2013

Budget 2013 was announced on 5 December 2012. This document will be updated throughout the week as details become available.

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

This document sets out changes in the areas of taxation, social welfare, health, housing, education, employment and other areas. It is an overview and not a complete statement of the measures announced in Budget 2013.

Some of the changes announced in the Budget come into effect immediately. Others take effect from the beginning of January 2013 or in mid-2013. Many others have to be finalised before coming into effect.

Some elements of these measures may change when the legislation required to bring them into effect is enacted.

The progress of the Finance (Local Property Tax) Bill 2012 and the Social Welfare Bill 2012 can be followed on the Houses of the Oireachtas website.

For a full list of the Budget changes, please see the Department of Finance website, budget.gov.ie. You can find a summary of the social welfare changes on the Department of Social Protection's website, welfare.ie.

Changes apply to the year 2013, unless specified otherwise.

Personal credits and allowances

There are no changes in personal credits and allowances and bands except for Rent Tax Relief.

Rent Tax Relief will be reduced, as in previous years:

Other income tax changes

Maternity Benefit will be taxable for all claimants. Universal Social Charge will not be payable. (1 July 2013)

Top Slicing Relief, which is a reduction of tax due on lump sum payments when leaving employment, will not be available on lump sums of €200,000 or more. It will apply to payments made on or after 1 January 2013.

Tax relief on all charitable donations will now be claimed by the charitable organisation at a single tax rate of 31%. The maximum qualifying amount will be €1 million.

PRSI

See below for details of PRSI changes.

Universal Social Charge (USC)

From 1 January 2013 reduced rates of USC will only apply to people aged 70 years of age and over earning €60,000 or less and to medical card holders under 70 earning €60,000 or less. People with incomes of €10,036 or less continue to be exempt from USC.

Local Property Tax (LPT)

The Local Property Tax (LPT) will come into force on 1 July 2013. A half year payment will be due for the second half of 2013, with a full year payment due in 2014.

The property owner will be liable for the LPT. This includes local authorities and social housing organisations.

Where the property is valued at €1 million or lower, the tax will be based on the mid-point of the relevant band at a rate of 0.18%. For properties valued over €1 million the tax will be charged at 0.18% on the first €1 million of value and 0.25% on any balance in excess of €1 million, with no banding applied.

Payment can be made by credit or debit card, cash, direct debit or by voluntary deduction at source from Irish salary or wages, occupational pensions or certain payments from the Department of Social Protection and the Department of Agriculture, Food and the Marine.

If the LPT is not paid, a charge will attach to the property which must be paid if the property is sold or the ownership transferred.

The Revenue Commissioners will send out an explanatory booklet on the operation of LPT, including valuation procedures, in March 2013.

Valuation will be by self-assessment in 2013 and those valuations will be used until the end of 2016.

Exemptions

The exemptions from the LPT will be the same as those applied to the Household Charge, with the following additional exemptions:

• New and previously unoccupied homes purchased between 1 January 2013 and 31 December 2016 will be exempt up to the end of 2016.
• Second-hand property purchased by a first time buyer between 1 January 2013 and 31 December 2013 will be exempt until the end of 2016.

Local Property Tax Table

Voluntary deferrals

People with gross incomes of up to €15,000 (single) and €25,000 (couples) can defer the full LPT until their financial circumstances improve or the property is sold.

Certain deferral arrangements are also available for people at higher levels of income, and for people whose income is less than a certain percentage of their annual mortgage interest.

Some owner-occupiers may be eligible to apply for marginal relief, which will allow them to defer up to 50% of their LPT liability.

Interest will be charged on deferred amounts at a rate of 4% per annum.

Further information in Revenue's FAQs.

Household Charge and Non-Principal Private Residence (NPPR) Charge

The Household Charge will be abolished from 1 January 2013 and the NPPR will cease with effect from 1 January 2014. Outstanding charges will be collected through the LPT system.

For more information see Annex B Local Property Tax (LPT) on budget.gov.ie (PDF).

Pensions

There is no change in tax relief on pension contributions in 2013, but from 2014 relief will be limited to pensions of €60,000.

There will be a once-off option to withdraw up to 30% of the value of funded Additional Voluntary Contributions (AVCs) made to supplement retirement benefits. Withdrawals will be liable to tax at an individual’s marginal rate. The option to withdraw will be available for 3 years from the passing of Finance Bill 2013.

Capital taxes

The rates of Capital Acquisitions Tax and Capital Gains Tax will be increased to 33% from 30% from 5 December 2012.

The current group tax-free thresholds for Capital Acquisitions Tax are being reduced by 10%. These reductions apply in respect of gifts or inheritances taken after 5 December 2012.

Deposit Interest Retention Tax (DIRT)

The rate of DIRT will be increased to 33% for payments made annually or more frequently and 36% for payments made less frequently than annually.

It will apply to payments made on or after 1 January 2013.

Motor taxes

See below for details of changes to motor taxes.

Farming taxes

The general rate of stock relief of 25% will be extended for a further 3 years to 2015 and the Young Trained Farmers rate of stock relief of 100% will be extended for a further 3 years to 2015. There will be amendments to the definition of registered partnerships for stock relief. The farmer’s flat-rate addition will be reduced from 5.2% to 4.8% with effect from 1 January 2013. Capital Gains Tax relief for land restructuring will also be introduced.

VAT

The 9% VAT rate applied to tourism will be maintained in 2013.

The annual VAT cash receipts basis threshold for small and medium enterprises is being increased from €1 million to €1.25 million with effect from 1 May 2013.

Excise duties

Alcohol products tax

The excise duty on a pint of beer or cider and on a standard measure of spirits is being increased by 10c (including VAT); the duty on a 75cl bottle of wine is being increased by €1 (including VAT), with pro-rata increases on other products. These increases take effect from midnight on 5 December 2012.

Tobacco products tax

The excise duty on a packet of 20 cigarettes is being increased by 10c (including VAT) with a pro-rata increase on the other tobacco products, with effect from midnight on 5 December 2012. The excise duty on roll-your-own tobacco is also being increased by 50c per 25g pouch with effect from midnight on 5 December 2012.

Carbon tax

The carbon tax will be extended to solid fuels on a phased basis. A rate of €10 per tonne will be applied with effect from 1 May 2013 and a rate of €20 per tonne from 1 May 2014.

Auto-diesel excise duty relief for licensed road hauliers

A relief from excise duty on auto-diesel for licensed road hauliers will be introduced from 1 July 2013. Under State Aid rules, Ireland must inform the EU Commission.

Expenditure under the Department of Social Protection will be €20.26 billion in 2013. Net savings of €390 million are to be achieved in 2013 rather than the €540 million that had been forecast. Further reductions of €440 million will be required in 2014.

There will be no changes to the rates of primary weekly social welfare payments and pensions.

People of working age

Jobseeker’s Benefit

The duration of Jobseeker's Benefit will be reduced by 3 months with effect from 3 April 2013. For people with 260 or more PRSI contributions paid, it will reduce from 12 months to 9 months. For people with fewer than 260 PRSI contributions paid, it will reduce from 9 months to 6 months.

Claimants getting Jobseeker's Benefit for 6 months or more on 3 April 2013 (or 3 months for people with fewer than 260 contributions) will not be affected.

Farm Assist

The assessment of means from self-employment, including farming, will be raised from 85% to 100%. The deductions from income for children are being discontinued (currently €127 per year for each of the first two dependent children and €190.50 per year for each subsequent child). (April 2013)

Back to Education Allowance

The Cost of Education Allowance (currently €300) payable to Back to Education Allowance participants will be discontinued for new and existing participants. (2013)

The weekly rate payable to new Back to Education Allowance participants will be equal to their previous social protection payment. (1 January 2013)

A standard maximum rate of €160 per week will apply to new Back to Education Allowance participants who were previously getting an age-related reduced rate of Jobseeker's Allowance. (1 January 2013)

Note: The weekly rate paid to new participants on the Vocational Training Opportunities Scheme (VTOS), Youthreach and FÁS further education and training programmes who move from jobseeker’s payments will also be matched to their previous social welfare payment. However, people under 25 who were getting an age-related reduced rate of Jobseeker’s Allowance will get a standard maximum rate of €160 per week. (1 January 2013)

Maternity Benefit

Maternity Benefit will be taxable for all claimants. Universal Social Charge will not be payable. (1 July 2013)

Employment schemes

See below for details of changes to employment schemes.

Children and Families

Child Benefit

Child Benefit rates will be reduced to €130 per month for the 1st, 2nd and 3rd child. (January 2013)

Child Benefit rates will be €140 per month for the 4th and subsequent children (announced in Budget 2012). (January 2013)

From the following year, the monthly rate for the 4th and subsequent children will be €130. (January 2014)

Back to School Clothing and Footwear Allowance

The Back to School Clothing and Footwear Allowance will reduce by €50 per child. This means that the Back to School Clothing and Footwear Allowance will reduce from €250 to €200 for children aged 12-17 or aged 18-22 in full-time education and from €150 to €100 for children aged 4-11 years. (2013)

One-Parent Family Payment

The age reductions in the One-Parent Family Payment which were due to apply from the beginning of 2013 and 2014 are being deferred to the beginning of July in each of those years. In addition, the period over which the transitional arrangements applying to existing recipients are to apply, will be extended from the end of 2014 to the beginning of July 2015. This change will provide more time for the creation of additional childcare places (see also 'Children Plus Initiative' below). This provision requires legislation and is not yet in effect. (This measure was not announced in Budget 2013 - it was inserted into the Social Welfare Bill 2012.)

Carers

There are no changes to rates of carer’s payments, to the half-rate Carer’s Allowance or to the extra payment for caring for more than 1 person.

Respite Care Grant

The annual Respite Care Grant will reduce from €1,700 to €1,375 for each person receiving care. (2013)

Older people

There are no changes to State pension rates.

State Pension (Contributory)

There will be changes to the definition of ‘yearly average’ and ‘alternative yearly average’ to enable rounding of figures. The increase in the number of qualifying contributions required (from 260 to 520) will now also apply to people getting reduced rate pensions on or after 1 January 2013.

Special pro-rata pensions for people with intermittent insurance (paid to people who had problems meeting yearly average requirements because they were not compulsorily insured before 1974) are being abolished.

State Pension Transition

New reduced rates of pension are payable for people who qualify for pensions on or after 1 January 2013 with a reduced yearly average of contributions. These reduced rates also apply to increases for qualified adults paid with the reduced rate pension.

Household Benefits Package

The value of the Telephone Allowance and the Electricity/Gas Allowance elements of the Household Benefits package will reduce for new and existing recipients.

The value of the Telephone Allowance will be reduced. The new monthly rate of €9.50 will show as a credit on the customer's bill or be paid as a cash allowance. (January 2013)

The Electricity/Gas Allowance will be set at a single rate based on the average market rate across all suppliers currently available (for an unchanged 150 units per month). The new rate of €35 per month will show as a cash credit for those who receive a bill or be paid as a cash allowance. (January 2013)

There are frequently asked questions on changes to the Household Benefits Package on welfare.ie.

There are no changes to the Fuel Allowance, Free Travel, Free TV Licence schemes or Living Alone Allowance.

Children Plus Initiative

From 2013 on, €14 million per year will be allocated from the Department of Social Protection to the Department of Children, Equality, Disability, Integration and Youth to fund a joint initiative that will provide over 6,000 after-school childcare places for children in primary school. This will be targeted at children from low-income families whose parents are availing of an employment opportunity (who engage with the Department of Social Protection’s INTREO service). It is envisaged that interested childcare providers, both community and commercial, will be paid a subsidy where a parent is referred by the Department of Social Protection under the initiative. The initiative will commence with a pilot scheme in early 2013.

An additional €2 million will be allocated to the School Meals Programme.

€2.5 million in funding will be allocated to the Department of Children and Youth Affairs for its Area-Based Child Poverty Initiative. This initiative will be co-funded by the Department of Children, Equality, Disability, Integration and Youth and philanthropic partners.

PRSI

The Employee's PRSI-Free Allowance of €127 per week (for those paying PRSI Class A, E and H) and €26 per week (for those paying PRSI Class B, C and D) will be abolished. (January 2013)

Employees who earn €352 or less per week continue to have no liability to make a PRSI contribution and are not affected by the abolition of the weekly PRSI-Free Allowance.

Currently, employees who pay PRSI at Classes B, C and D are exempt from PRSI on self-employed earned income (from a profession or trade) and any other unearned income (for example, rental income.) This exemption will be abolished. All such income will become liable to PRSI at the rate of 4%. (1 January 2013)

Unearned income for everyone else will become subject to PRSI in 2014. This means that PRSI will be payable on income generated from wealth such as rental income, investment income, dividends and interest on deposits and savings. (2014)

The minimum annual PRSI contribution for people with annual self-employed income over €5,000 will increase from €253 per annum to €500. (2013)

Voluntary contributions

The flat-rate voluntary contribution paid by a formerly self-employed person is being increased from €253 to €500. Former contributors at Classes A, H and E will continue to pay voluntary contributions at 6.6% but their minimum payment will increase from €317 to €500. Former contributors at modified rates continue to pay voluntary contributions at 2.6% but their minimum payment will increase from €126 to €250 (1 January 2013)

Miscellaneous savings

The cost to the Department of Social Protection of medical certificates for illness and disability-related schemes will be reduced. This is an administrative saving in the Department.

Savings will be achieved on Exceptional Needs Payments under the Supplementary Welfare Allowance Scheme.

Overpayment recovery

Up to 15% of a person’s weekly social welfare payment can be deducted for the purpose of recovering an overpayment. A person is not entitled to compensate for any overpayment deduction by getting an additional payment of Supplementary Welfare Allowance.

Redundancy payments

The employer rebate of statutory redundancy payments (currently 15%) will be discontinued. (January 2013)

Rates of payment

Note1: for those under age 66 years

Note2: for those aged 66 years or over

Housing

Household Charge and NPPR

The Household Charge will cease with effect from 1 January 2013. The Non-Principal Private Residence (NPPR) Charge will cease with effect from 1 January 2014. However, unpaid arrears together with any interest and penalties that have accrued will remain a charge on the property to which they relate.

The Revenue Commissioners will collect any unpaid Household Charge for 2012. Any arrears that are not discharged before 1 July 2013 will be increased to €200 and will be collected through the Local Property Tax system.

Local Property Tax

See above for details of the Local Property Tax.

Mortgage interest relief

It was confirmed that mortgage interest relief will not be given on mortgages taken out after 31 December 2012.

Social housing

An additional €10 million will be allocated to the Department of the Environment, Community and Local Government to facilitate delivering these social housing units. It is expected that over 5,000 units will be provided in 2013, including:

• 350 units for people with special housing needs
• 150 units specifically for people leaving institutional care
• An additional 400 permanent homes delivered through capital expenditure under the Social Housing Investment Programme
• 300 transfers under the mortgage-to-rent scheme
• Approximately 4,000 units to be delivered under social leasing, including property transfers from NAMA, the Rental Accommodation Scheme (RAS) and the proposed ‘mortgage-to-lease’ initiative.

Urban regeneration

Proposals for targeted incentives in already identified regeneration areas will be explored. €80 million is being provided for the national regeneration programme.

Employment and Small and Medium Enterprises

SME Tax Reform Plan

The SME 10 Point Tax Reform Plan has been announced to help small and medium enterprises (SMEs) to assist their cash flow position and support their creation of jobs. It includes the following measures:

• The 3 Year Corporation Tax Relief for Start Up Companies is being extended to allow any unused relief arising in the first 3 years of trading to be carried forward for use in subsequent years. This is subject to the maximum amount of relief in any one year not exceeding the eligible amount of Employers’ PRSI in that year.
• The Close Company Surcharge is being amended by increasing the de minimis level to €2,000 to reduce the administrative burden and assist cash flow
• Amount of expenditure eligible for the R&D Tax Credit on a full volume basis (without reference to the 2003 base year) is increased to €200,000 to encourage innovation and help cash flow
• Increase in the VAT cash receipts basis accounting threshold from €1 million to €1.25 million to help cash flow
• Extension of the Foreign Earnings Deduction for work related travel to specified countries to help boost demand for Irish goods and services abroad
• Extension of the Employment and Investment Incentive scheme to 2020 to help companies access funding
• Review of the ‘carried interest’ provision in the tax code to help small businesses to access funding
• Announcement of a joint Revenue and Department of Finance public consultation: ‘Taxation of Micro Enterprises: Reduction in Compliance Costs’ to identify ways to ease the administrative burden

Credit initiatives and funding

The following credit specific initiatives have been announced:

• Approval to the Credit Review Office (CRO) to extend the team of available reviewers so that SMEs seeking assistance from the CRO receive a considered and timely response to their application
• The publication by the CRO of specific guidance for SMEs on accessing credit from banks
• The National Pensions Reserve Fund is also developing a range of support funds to provide equity, finance and restructuring and recovery investment to the SME sector. The funds are expected to range in size from €100 million to €400 million

Provision has been made within Enterprise Ireland for the development of a new ten-year €175 million Venture Capital Fund to fund new and expanding Irish companies.

County Enterprise Boards are being restructured to provide a One-Stop-Shop for small businesses through the local authority system. This reform will be supported with an allocation of over €26 million in 2013, which will facilitate this transition and fund schemes to support small businesses across the economy.

Job creation

The PlusOne initiative, which is currently being finalised, is intended to encourage employers to hire individuals that are long-term unemployed. It is envisaged that this new incentive will replace the Revenue Job Assist and the Employer PRSI Incentive schemes.

Labour market activation schemes

Additional €12 million in 2013 and €26 million in a full year to increase the numbers of placements available on labour activation schemes as follows:

• JobBridge: There will be 2,500 new JobBridge places increasing the number of places available to 8,500.
• Tús: There will be 2,500 new places on the Tús scheme which will increase the number of places available to 7,500.
• Community Employment (CE): there will be 2,000 additional places available on CE schemes.
• There will be 3,000 places in a new Local Authority Social Employment Scheme.

Redundancy

Redundancy Payments Scheme: The employer rebate of statutory redundancy payments (currently 15%) will be discontinued. (January 2013)

Education and Training

Third level Education

The student contribution will increase by €250 per annum for the academic years 2013/2014, 2014/2015 and 2015/2016.

The income thresholds for entitlement to the student grant are reduced by 3% for people qualifying in 2013.

Pupil/teacher ratio

The pupil/teacher ratio for fee-paying post-primary schools will increase by 2 points, from 21:1 to 23:1. (2013/2014)

The pupil/teacher ratio in Post Leaving Certificate (PLC) programmes will also increase by 2 points, changing from 17:1 to 19:1. The number of PLC places should not be affected. (2013/2014)

Bullying

The Department of Education and Skills will allocate €500,000 to tackle bullying in schools. The funding will be spent in line with the Action Plan on Bullying to be published shortly.

Further Education and Training Scheme

New participants on the Vocational Training Opportunities Scheme (VTOS), Youthreach and FÁS further education and training programmes who move from jobseeker’s payments will no longer have their new payments increased to the maximum €188 per week, if their jobseeker's payment is less than this. However, people under 25 who were getting an age-related reduced rate of Jobseeker’s Allowance will get a standard maximum rate of €160 per week. (1 January 2013)

Labour market activation

€48 million has been provided in the National Training Fund for labour activation measures for the unemployed and targeted skills training in 2013.

The National Training Fund expenditure will provide:

• €20 million under the Labour Market Education and Training Fund to provide 6,500 places in 2013 for people who are long-term unemployed
• €23 million for the Springboard initiative to increase the part-time higher education opportunities for unemployed people
• €5 million for a second phase of ICT Skills Conversion courses

Other measures for schools

The overhaul of the Junior Cycle will be supported by an investment of €3 million in 2013, and €8.7 million in 2014.

The Literacy and Numeracy Strategy will continue to be rolled out at a cost of €6.5 million in 2013.

Approximately 900 jobs will be created for teachers – 450 at primary level and 450 at second level.

Childcare

A new After-School Childcare Scheme (part of the Children Plus Initiative) for primary school children will provide childcare to low-income families so that they can take up employment. It is expected that the scheme will provide over 6,000 childcare places. A pilot scheme will start in early 2013. (See also ‘Children Plus Initiative’ above)

€2.5 million has been provided for a new ‘area-based approach to child poverty’ initiative to further enhance targeted early-childcare and education supports for children in a number of disadvantaged areas.

€5 million has been allocated to the Department of Children and Youth Affairs in 2013 to provide for a number of initiatives including a new capital programme for Youth Cafes and other youth projects as well as schemes funding play and recreation and parent and toddler groups.

The new Child and Family Support Agency will be established in 2013. This will involve moving child welfare and protection services out of the HSE and creating a new statutory body which will encompass both the National Educational Welfare Board and the Family Support Agency.

Children’s Detention Centre

Construction work on new facilities at the Oberstown Children’s Detention Centre will begin in 2013. This development will provide for the transfer of all 17-year-olds from St. Patrick’s Institution to Oberstown in 2014.

Health

The threshold for the Drugs Payment Scheme will increase from €132 to €144 per month from January 2013.

The prescription charge for Medical Card holders and people with Hepatitis C who have a Health Amendment Act Card will increase from 50c per item to €1.50 per item, up to a monthly limit of €19.50 per family (increased from €10).

The medical card weekly income limits for people aged over 70 will decrease from €700/€1,400 (single person/couple) to €600/€1,200. The medical card will be replaced with a GP Visit card if weekly income is in the range €600–€700 for a single person or €1,200–€1,400 for a couple.

A further €35 million is allocated in 2013 for the continued development of mental health services.

€15m is allocated to provide free GP care for people with certain prescribed illnesses.

Professional fees for health service providers such as GPs will be reduced.

Environment

€9 million is allocated to improve the energy consumption of central government buildings up to 2015.

Seed capital of €35 million is allocated for the Energy Efficiency Fund, with a view to establishing a leveraged fund of over €70 million.

Motoring

Vehicle Registration Tax (VRT)

Rates of VRT are being increased with effect from 1 January 2013. There is a revised structure for vehicles taxed on the basis of CO2 emissions.

The VRT reliefs currently in place for electric vehicles (up to €5,000), plug-in hybrid electric vehicles (up to €2,500), and hybrid and flexible fuel vehicles (up to €1,500) are being retained for a further 12 months to the end of December 2013.

Motor Tax

Motor Tax rates across all categories apart from electric cars will increase with effect from 1 January 2013. There is a revised structure for vehicles taxed on the basis of CO2 emissions. Increases are being applied to motor tax rates for all other categories of vehicle also. There is a higher rate of increase in motor tax for cars taxed on the basis of CO2.

Motor tax on electric cars will be reduced to €120.

Find out more about the changes to rates of VRT and motor tax on budget.gov.ie (PDF).

Vehicle registration

A second registration period is being introduced in 2013. The sequence will take the form of a separate 3-digit year identifier for the first and second 6-month periods in the year, for example, 131 and 132 respectively.

Driving licences

A new plastic card driver licence will be introduced from 19 January 2013.

From 1 January 2013 the cost of a licence or learner permit is as follows:

• Ten-year licence fee - €55
• Three-year licence fee - €35
• One-year licence fee - €25
• Exchange a foreign licence - €55
• Learner permit - €35
• Replace a lost licence or learner permit - €35

From 12 January 2013 it will cost €35 to make changes to an exiting licence or learner permit, for example, add a new category.