Budget 2014

Budget 2014 was announced on 15 October 2013.

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 2014.

This document will be updated throughout the week as more details become available.

Some of the changes announced in the Budget come into effect immediately. Others take effect from the beginning of January 2014 or in mid-2014. 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.

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.

Income tax

From 1 January 2014, the One-Parent Family Tax Credit is to be replaced with a new Single Person Child Carer Tax Credit. The new credit will be to the same value but will be available only to the principal carer of the child.

Tax relief on private health insurance premiums will be limited to €1,000 for each adult insured and €500 for each child. This change applies to policies which are renewed or entered into on or after 16 October 2013. A child for the purposes of this provision includes a student over 18 years and under 23 years who is in full-time education. Relief will continue to be granted at 20%.

A new Home Renovation Incentive scheme of tax relief will be introduced for a period of two years. The scheme provides tax relief for home renovation work.

To encourage those who wish to start their own business, an exemption from income tax up to a maximum of €40,000 per annum will be provided for a period of two years, to individuals who set up a qualifying, un-incorporated business, having been unemployed for a period of at least 15 months prior to establishing the business.

Top Slicing Relief, which is a reduction of tax due on lump sum payments when leaving employment, will no longer be available from 1 January 2014 in respect of all ex-gratia lump sum payments.

Lump sum payments to claimants under the Magdalene Laundry Fund will be tax exempt.

Capital Gains Tax

The relief from Capital Gains Tax (CGT) (in respect of the first 7 years of ownership) for properties purchased between 7 December 2011 and 31 December 2013 is being extended by one year to include properties bought to the end of 2014. Where property purchased in this period is held for seven years the gains accrued in that period will not attract CGT.

A new Capital Gains Tax incentive is being introduced to encourage entrepreneurs (in particular "serial" entrepreneurs) to invest and re-invest in assets used in new productive trading activities.

Capital Gains Tax retirement relief is being further extended to disposals of leased land in circumstances where, among other conditions, the land is leased over the long-term (a minimum lease of 5 years) and the subsequent disposal is to a person other than a child of the individual disposing of the farmland. The purpose of the measure is to encourage older farmers who have no children to whom to transfer their farm to lease out their farmland over the long term to younger farmers.

Excise duties

The excise duty on a packet of 20 cigarettes is being increased by 10 cents (including VAT) with a pro-rata increase on the other tobacco products, with effect from midnight on 15 October 2013.

The excise duty on a pint of beer or cider, and on a standard measure of spirits is being increased by 10 cent (including VAT); the duty on a 75cl bottle of wine is being increased by 50 cent (including VAT), with effect from midnight on 15 October 2013.

VAT

The 9% reduced VAT rate, which was introduced in 2011 as part of the Government Jobs Initiative for tourism-related services, was due to revert to 13.5% on 31 December 2013. The 9% VAT rate is being retained.

The annual VAT cash receipts basis threshold for small to medium businesses is being increased from €1.25 million to €2 million with effect from 1 May 2014. This change will assist such businesses in the critical area of cash-flow and reduce administration.

The farmer’s flat-rate addition will be increased from 4.8% to 5% with effect from 1 January 2014. The flat-rate scheme compensates unregistered farmers for VAT incurred on their farming inputs.

Other duties and taxes

The rate of Deposit Interest Retention Tax (DIRT), together with the rates of exit tax that apply to life assurance policies and investment funds, is being increased and will now be 41% whether payments are made annually or more frequently (previously 33%) or are made less frequently than annually (previously 36%). The increased rates will apply to payments, including deemed payments, made on or after 1 January 2014.

The 0.6% stamp duty levy on pension fund assets is to increase to 0.75% for the year 2014. The levy will be reduced to 0.15% for 2015.

The Government has decided that a specific contribution to the Exchequer is to be obtained from the financial sector for the period 2014 to 2016. The contribution will be related to the amount of tax paid on deposit interest by the institution in the calendar year 2011. Full details will be contained in the Finance Bill.

In 2014 €19.6 billion is to be spent on social protection in 2014. New spending reductions have been limited to €226 million. The Department of Social Protection has received an increased capital allocation of €15 million to roll out Intreo centres fully.

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

Jobseeker’s Allowance and Supplementary Welfare Allowance

From 14 January 2014 people without children getting Jobseeker’s Allowance who are aged between 18 and 24 years will receive €100 per week. Existing claimants aged between 18 and 24 on a higher rate will have no change in their rate. This provision applies to Supplementary Welfare Allowance recipients from 9 January.

From 14 January 2014 people without children getting Jobseeker’s Allowance aged 25 years will receive €144 a week. Existing claimants aged 25 on a higher rate will have no change in their rate. This weekly €144 rate will increase to €188 when they reach 26 years of age. This provision applies to Supplementary Welfare Allowance recipients from 9 January.

From 14 January 2014 these reduced rates of Jobseeker’s Allowance will apply to people aged 25 and under who have exhausted their entitlement to Jobseeker’s Benefit.

Currently, all Jobseeker's Allowance and Supplementary Welfare Allowance recipients, regardless of age, who have children continue to receive a personal rate of €188 (JA) or €186 (SWA) per week and an increase for a qualified adult, if applicable, of €124.80 plus qualified child increases. There are no changes to those arrangements.

The HSE care provision for people getting JA is also extended to age 24 (from 21). So, for example, a person aged 20 who is in receipt of a JA rate of €188 because they were in the care of the HSE during their 17th year can remain on this rate up to age 24.

Returning to education or training

From 14 January 2014 people aged 25 will get an age-reduced rate of Jobseeker’s Allowance of €144. If they take part in the Back to Education Scheme (BTEA) they will get a standard maximum rate of €160 per week.

All new BTEA participants aged under 26 who were getting a reduced age-related Jobseeker’s Allowance payment, will get a maximum BTEA rate of €160 per week (any means participants have will be deducted from this rate).

People aged 25 who were getting an age-related reduced rate of Jobseeker’s Allowance will also get a standard weekly allowance of €160 if they take part in a FÁS course, the Vocational Training Opportunities Scheme (VTOS) or a Youthreach course.

Maternity Benefit and Adoptive Benefit

From 6 January 2014 the minimum and maximum rates of Maternity Benefit and Adoptive Benefit will be standardised at €230 per week for new applicants. This will result in an increase of up to €12.20 for those receiving less than €230 per week and a reduction of up to €32 per week for all other claimants. The change will apply to new claimants. Existing claimants will not be affected.

Illness Benefit

From 6 January 2014 no Illness Benefit payment will be made for the first 6 days of illness (up from 3 days). This means that a person will not be entitled to Illness Benefit for the first 6 days of their claim.

Rent and Mortgage Interest Supplements

From January 2014 the minimum contribution towards Rent Supplement and Mortgage Interest Supplement for couples will be increased by €5 per week, from €35 to €40. This aligns Rent and Mortgage Interest Supplement contributions with the local authority rents structure. This change applies to new and existing recipients.

The minimum contribution for single people, including single people with children (currently €30), will not change.

The Mortgage Interest Supplement (MIS) scheme will be closed to new entrants and will be wound down for existing recipients over a 4-year period from 1 January 2014.

Child Benefit

There are no new changes to Child Benefit in Budget 2014. Child Benefit will be standardised at €130 per month for each child from January 2014, as announced in Budget 2013.

Breakfast clubs

Extra Breakfast Clubs will be provided to support school-going children in disadvantaged areas.

Back to School Clothing and Footwear Allowance

The Back to School Clothing and Footwear Allowance is unchanged for all children under 18. In 2014 it will continue to be paid for those aged 18 years and over who are in second-level education only, not in third-level education.

Household Benefits Package

From January 2014 the Telephone Allowance will be discontinued for existing and new recipients. The value of the allowance is €9.50 per month per household. The Free TV Licence and Electricity Allowance or Gas Allowance paid under the Household Benefits Package will continue to be paid with no changes to rates. There are no changes to the Free Travel Scheme and the Fuel Allowance Scheme.

In 2014 the annual payment to RTÉ for the Free TV Licence will reduce by €5 million to €54.17 million. This will not affect recipients who will continue to get a free TV licence.

State Pension Transition

As previously announced the State Pension (Transition) will no longer be paid from January 2014.

Invalidity Pension

The higher weekly Invalidity Pension rate of €230.30 paid when claimants reach age 65 will be discontinued. The rate payable to people aged 65 (and under) will be €193.50 per week. It will apply to people claiming Invalidity Pension who reach their 65th birthday from 2 January 2014. Existing 65 year olds are unaffected. This measure is being undertaken in line with the abolition of the State Pension (Transition) from January 2014.

People who are getting Invalidity Pension (existing and new recipients) will continue to be automatically transferred to State Pension (Contributory) at age 66 and they will receive a weekly rate of €230.30.

The weekly rate payable to all qualified adults of people claiming Invalidity Pension will be standardised at €138.10 per week. This measure will apply to spouses and partners aged 66 or over who reach their 66th birthday from 2 January 2014. Existing spouses and partners aged 66 and over are unaffected.

Bereavement Grant

From January 2014 the Bereavement Grant of €850 will be discontinued.

The Funeral Grant under the Occupational Injuries Scheme will continue to be paid. The six weeks' payment after death (where the deceased person’s payment continues for 6 weeks to their spouse or partner who is also getting a weekly welfare payment), the Widowed or Surviving Civil Partner’s Grant of €6,000 and assistance with funeral costs under Exceptional Needs Payments are unaffected.

Miscellaneous savings

In 2014 savings of €2.1 million will be achieved in Exceptional Needs Payments (under the Supplementary Welfare Allowance Scheme) arising through the standardisation of payments.

The value of certain social welfare payments will be recovered by the Department of Social Protection from insurance companies in respect of compensation awards arising from an accident or injury. Savings of €21 million will be made from this reform measure.

Additional savings of €30 million will be realised in fraud and control measures during 2014.

Rates: 2013 and 2014

Note1: for those under age 66 years

Note2: for those aged 66 years or over

Housing

Home Renovation Incentive

A scheme of tax relief for home renovation work is being introduced for a period of 2 years.

The Home Renovation Incentive (HRI) will provide an income tax credit of up to €4,050 to homeowners who carry out renovation and improvement works on their principal private residences in 2014 and 2015. It will be payable over the 2 years following the year in which the work is carried out. The credit will be calculated at a rate of 13.5% on all qualifying expenditure over €5,000, up to a maximum of €30,000.

Qualifying works include extensions and renovations to the home, window-fitting, plumbing, tiling and plastering. Builders must be fully tax-compliant and all expenditure and relief claims will have to be registered electronically with the Revenue Commissioners.

Investment projects

€30 million is allocated to recommence the State’s house-building programme. This will facilitate up to 500 additional housing units between a small number of new infill developments and the return of previously uninhabitable units to the housing stock.

€10 million will be provided for an unfinished housing estate resolution initiative where there is no development bond to carry out essential public works such as footpaths, drainage and roads.

Investments by NAMA will include the construction of 4,500 new houses and apartments in Dublin.

Part of the €200 million to be invested from the sale of the National Lottery licence in 2014 will be allocated to the Better Energy Programme and for up to 5,700 housing adaptation grants for older people and people with a disability.

€10 million is allocated to resolve the problems at Priory Hall.

A new model of financing social interventions, to be called 'Social Impact Investment' will aim to use private capital to provide better outcomes for citizens. The pilot phase is seeking private sector investment partners to provide long-term homes for over 130 homeless families in the Dublin region. A total of €45 million is being provided for homeless accommodation.

There will also be a new insulation scheme for local authority housing. It is expected that the €25 million being provided will improve the energy efficiency of 12,500 local authority homes.

€79 million will be provided for housing regeneration.

Up to 150 new leased units will be provided for people with disabilities who are leaving institutional care and 175 new housing units will be provided for people with special needs.

A new remediation scheme will be set up for homes affected by Pyrite.

The Living City Initiative is being extended to Cork, Galway, Kilkenny and Dublin. The eligibility criteria will now include all buildings built prior to 1915. The initiative aims to assist the regeneration of retail and commercial districts and encourage families to live in historic buildings in city centres. EU state-aid approval will be required.

Assistance towards paying for housing

The minimum contribution towards Rent Supplement for all couples will increase by €5 per week from €35 to €40 to align Rent Supplement contributions with the local authority rents structure. The minimum contribution towards Mortgage Interest Supplement for all couples will increase by €5 per week from €35 to €40. The minimum contribution for single people, including single people with children, will not change.

The Mortgage Interest Supplement scheme will be discontinued for new entrants. For existing recipients, the scheme will be wound down over a 4-year period from January 2014.

The legislative basis for the new Housing Assistance Payment (HAP), which is to replace Rent Supplement, will be introduced in 2014. A test phase will begin in seven local authorities.

Housing tax reliefs

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

No new changes were announced to Mortgage Interest Relief, which only applies to mortgages taken out by 31 December 2012.

The previously announced rates and ceilings will apply in 2014 in accordance with the tables published by Revenue. http://www.revenue.ie/en/tax/it/reliefs/tax-relief-source-mortgage-rates.html

Employment and Business

Small and medium businesses

A Start Your Own Business (SYOB) measure is being introduced to encourage people who are long-term unemployed to start their own unincorporated business, by providing a two-year exemption from income tax (up to a maximum of €40,000 per year) for people who have been unemployed for at least 15 months prior to starting their own business.

Local Enterprise Offices will get additional funding of €3.5 million for investment in supports for start-ups and growing businesses.

Trading-online voucher scheme: In 2014 €5 million will be provided to assist the rollout of a national trading-online voucher scheme, aimed at getting 2,000 small Irish businesses trading online. Under a pilot scheme being launched in October 2013, vouchers of up to €2,500 will be provided to 50 small companies to help them develop an online trading presence. The scheme will be administered by the Dublin City Enterprise Board and will target small enterprises that employ fewer than 10 people and have a turnover of less than €2m per annum.

Credit Review Office: the threshold for credit applications that can be reviewed by the Credit Review Office is being increased from €500,000 to €3 million.

The VAT cash threshold for small and medium enterprises will increase from €1.25 million to €2 million with effect from 1 May 2014.

A new SME Communications Strategy will aim to increase awareness of State supports amongst small and medium enterprises (SMEs) and to ensure that there is a greater awareness amongst businesses of the Credit Guarantee Scheme, which will soon be re-launched.

A new Building Business Capacity programme, consisting of 2 days dedicated off-site training and expert mentoring support, will aim to enhance the business and financial capacity of SMEs in relation to understanding and using a broader range of financial products, as well as equipping them with tools needed to make a strong business case when applying for credit. The programme will be launched on a pilot basis, with 1,000 SMEs expected to take part in 2014.

Supports for investment in business

Real Estate Investment Trusts (REITs): it has been agreed with the Department of Justice to propose the inclusion of REITs as an investment option in the Immigrant Investor Programme.

Research and Development Tax Credit: the amount of expenditure eligible for the R&D Tax Credit on a full volume basis (without reference to the 2003 base year) is being increased from €200,000 to €300,000. The limit on the amount of R&D expenditure that can be outsourced will increase from10% to 15%.

Capital Gains Tax: A new relief from Capital Gains Tax is being introduced to encourage entrepreneurs who reinvest the proceeds from the disposal of assets, on which CGT has previously been paid, into a new investment in productive trading activities. The measure will apply where someone who has already paid CGT on the disposal of assets invests in a new business in the period 1 January 2014 to 31 December 2018 and subsequently disposes of this investment no earlier than three years after the date of investment. The relief will be a tax credit equal to (i) the lower of the CGT paid on the previous asset disposal or (ii) 50% of the CGT due on any gain from the future disposal of the new investment. EU state-aid approval is required for this measure.

Employment and Investment Incentive: The initial 30% relief available for investments under the Employment and Investment Incentive (EII) is being removed from the high earners restriction for a period of 3 years. This restriction limits the amount of tax reliefs that can be claimed by high income individuals. The EII provides that a maximum of €150,000 can be invested by an individual per annum. Therefore, by lifting the restriction on the initial 30% relief, these investors should be encouraged to invest more funds in the EII and improve the availability of funds to SMEs.

Supports for unemployed people

It is estimated that spending on schemes such as Community Employment, Tús and JobBridge will be €1.08 billion in 2014.

Provision of part-time childcare places for Community Employment participants under the Childcare Education and Training Support (CETS) scheme is to be introduced in early 2014.

EU Youth Guarantee: As part of the implementation of the EU Youth Guarantee, which is to be finalised and submitted to the EU by the end of 2013, it is proposed to:

• Reduce the threshold for JobsPlus eligibility to 6 months or less of unemployment for people aged under 25
• Provide for an additional intake of 1,500 young people on to the JobBridge scheme
• Ensure that 1,000 places on the Tús scheme are targeted at young people
• Develop a pilot programme to support young unemployed people to take up opportunities under schemes such as ‘Your First EURES Job’
• Ring-fence a minimum of 2,000 additional training places on Momentum for people aged under 25

Education and Training

Pupil/teacher ratio

The pupil/teacher ratio in all schools will remain unchanged. DEIS schools in disadvantaged areas will continue to be provided with targeted supports over and above other schools.

School Books Rental Scheme

€15m will be available to primary schools over three years to invest in book rental schemes. These funds will be paid to schools in the form of a seed capital grant, with DEIS schools receiving €150 per child and non-DEIS schools receiving €100 per child.

Third-level education

The Student Contribution will continue to increase by €250 per annum for the academic years 2014/2015 and 2015/2016.

Further education and training

FÁS apprentices will be required to pay a pro-rata Student Contribution proportionate to the time they spend in Institutes of Technology.

From 1 January 2014, people getting one of the social welfare payments listed below will not get a FÁS or Youthreach training allowance. However, they will continue to get their social welfare payment. This will apply to new participants only.

• Invalidity Pension
• Illness Benefit
• One-Parent Family Payment
• Farm Assist
• Fish Assist

From 1 January 2014, the €20 bonus payment to long-term unemployed participants in FÁS courses, the Vocational Training Opportunities Scheme (VTOS) and Youthreach will not be paid to new participants.

From 14 January 2014 new claimants of Jobseekers Allowance aged 25 years will get a reduced maximum payment of €144 per week. This will be replaced by an allowance of €160 if a claimant participates in the Back to Education Allowance scheme, in a FÁS course, the Vocational Training Opportunities Scheme (VTOS) or Youthreach course.

Momentum

A minimum of 2,000 additional training places on Momentum will be ring-fenced for participants under 25 years of age as part of the EU Youth Guarantee Fund.

Child and Family Agency

An extra €6.7 million has been allocated to support the reform of child welfare and protection services upon the establishment of the new Child and Family Agency.

Childcare

The School Age Childcare Initiative will be implemented, targeting low-income families and supporting parents who avail of an employment opportunity.

Delivery of the Quality Agenda for Pre-School Services was announced. This will include strengthening the pre-school inspection system, supporting the implementation of the early education frameworks Síolta and Aistear, and assisting staff to meet new qualification requirements.

Area Based Childhood (ABC) Programme

The roll-out of the Area Based Childhood (ABC) programme was announced. It aims to support better outcomes for disadvantaged children through more innovation, effective planning, integration and delivery of services.

Youth programmes and services

An extra €1m is allocated to support youth programmes and services. A range of youth programmes and services will be provided to 400,000 young people.

Children’s Detention Centre

Construction work on new Children Detention School facilities in Oberstown, Lusk, Co Dublin will continue in 2014. This development provides for the assignment of responsibility for all young people under the age of 18 years to the Oberstown campus by the third quarter of 2014.

School projects

There will be 28 school capital projects. A social procurement contract clause is included in the schools capital works for the first time ensuring that a proportion of the workforce is drawn from the long-term unemployed.

Activation measures

The total 2014 allocation for activation places in education and in training and work experience is €1.6 billion. This will provide nearly 300,000 places in work, education and training programmes across the Departments of Social Protection and Education and Skills. 94,000 places will be reserved for the long-term unemployed.

Health

Free GP care for children aged 5 years and under

Free GP care will be introduced during 2014 for children aged 5 years and under. This will require legislation.

Medical cards and GP Visit Cards

The income limits for medical cards for people aged over 70 will reduce from €600/€1,200 per week (single person/couple) to €500/ €900 per week. The GP Visit Card will still be available to people aged over 70 with income up to €700/€1,400 per week. It is planned to have the necessary legislation in place by the end of 2013 or early 2014.

Unemployed people who return to work will be entitled to retain a GP Visit Card for 3 years without a means test. Currently they can retain their medical card for 3 years. This measure requires legislation and it is to be phased in during 2014.

A planned review of all medical cards to remove ineligible and redundant cards is expected to save €113 million.

Prescription charge

The prescription charge for medical card holders is increased to €2.50 per item (from €1.50), up to a maximum of €25 per month per person or family (increased from €19.50). The new charges are expected to apply from 1 December 2013.

Generic drugs

The substitution of generic drugs and the phased introduction of reference pricing, starting from 1 November 2013, are expected to save €50 million.

Tax relief on health insurance premiums

The amount of private health insurance premium that qualifies for tax relief will be limited to €1,000 for adults and €500 for children (including students aged 18–23 years in full-time education). This change applies to policies which are renewed or entered into on or after 16 October 2013.

Other provisions

€10 million is to be saved by the removal of products from the List of Reimbursable Items for the medical card and Drugs Payment Scheme. The HSE will now consider products for review in compliance with the provisions of the Health (Pricing and Supply of Medical Goods) Act 2013.

The Health (Amendment) Act 2013 introduced a new system of charges for private in-patients using public hospital facilities. This will take effect from 1 January 2014.

€20 million is allocated in 2014 for the development of mental health services in line with the strategy document "A Vision for Change".

Tourism

The Air Travel Tax is being reduced to zero with effect from 1 April 2014.

The 9% reduced VAT rate, which was introduced in 2011 as part of the Government Jobs Initiative for tourism related services is being retained.

Funding of €8 million is being provided to develop the Wild Atlantic Way tourism route along the west coast.

Other Announcements

Community and Rural Development

€48 million will be invested in a revised Local and Community Development Programme in 2014 to increase access to formal and informal educational activities and resources, and to increase people's work readiness and employment prospects. Some 14,000 people who are distanced from the labour market will receive direct one-to one labour market training and supports through the Programme.

Additional public service staff

The target for public service numbers next year has been adjusted to allow some scope for additional staff in classrooms, in hospital wards and for front-line policing.

Appeal Commissioners

The Appeal Commissioners will be reformed in 2014. The Appeal Commissioners hear and decide upon appeals from the public about decisions of the Revenue Commissioners on taxes and duties.

National Lottery

The Government recently concluded the award of the National Lottery Licence for over €400 million. €200 million of this is ring-fenced for the construction of the National Children’s Hospital.

A further €200 million will be used to support local economic activity and job creation.

The €200 million will help to fund:

• Road maintenance and repair works
• A new round of Sports Capital Grants
• The building of a new National Indoor Training Arena at the National Sports Campus
• The Better Energy Programme
• Housing adaptation grants for older people and people with a disability
• The National City of Culture Initiative
• The development of a large scale multi-functional events centre in Cork
• The Wild Atlantic Way Driving Route tourism project
• A number of 1916 Commemoration Projects

The funding allocations for these and other projects will be included in the Revised Estimates Volume 2014.

Garda recruitment

A new Garda recruitment programme will begin next year alongside the independent review of the force agreed under the Haddington Road Agreement.

Targeted objective Garda strength is to be maintained at 13,000 and there will be an additional €9m investment in the Garda fleet.

Garda Vetting Service

Additional funding will be provided to the Department of Justice and Equality to increase staff for the Garda Vetting Service.

Court of Appeal and the Legal Services Regulatory Authority

It is expected that the new Court of Appeal and the Legal Services Regulatory Authority will be established during 2014.

Sport

A new round of the Sports Capital Programme will start in 2014. Clubs will be able to apply for essential works like new changing rooms, pitches, lighting and other projects. A new National Indoor Arena will be developed at the National Sports Campus.

Transport

A €50 million roads stimulus package will allow some maintenance works to be carried out next year. The intended cut in the roads capital budget for 2014, originally proposed as a drop of €116 million, will now be a smaller adjustment of €66 million.

Water services

The transfer of water services responsibilities, assets and liabilities from local authorities to Irish Water will take place on 1 January 2014. Irish Water will receive €240 million in Exchequer equity investment to fund the water and wastewater capital programme.