Budget 2021

Budget 2021 was announced on Tuesday, 13 October 2020.

If you are looking for information on Budget 2022, announced on Tuesday, 12 October 2021, please visit our Budget 2022 page.

This document sets out the main changes in 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 2021.

This document will be updated 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 2021 or later in 2021. 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.

More information on Budget 2021

You can access a range of information from gov.ie:

• The Expenditure Report
• Spending review
• Taxation measures
• Citizen's guide to Budget 2021
• Ministers' speeches
• Budget publications

You can also visit the Department of Finance and Department of Public Expenditure and Reform budget website.

The economy is expected to shrink 2.4% in 2020 and 1.7% in 2021 because of the COVID-19 pandemic. The COVID-19 pandemic has also meant that that many people have lost their jobs or had to close their businesses. €8.5 billion will be spent on supporting people and businesses affected by COVID-19. In summary, this includes:

• €1.9 billion for personal protective equipment (PPE) in the health sector and to increase COVID-19 testing capacity
• €3.2 billion to support people through the COVID Pandemic Unemployment Payment (PUP) and the Employment Wage Subsidy Scheme (EWSS)
• €100 million to support businesses affected by COVID-19
• €2.1 billion for a ‘contingency reserve’ for use if needed
• Reducing VAT for the tourism and hospitality sectors from 13.5% to 9%
• €232 million to help schools make their classrooms safe for students
• €395 million to help transport services run at reduced capacity

A Recovery Fund of €3.4 billion will be available to support the economy where needed in response to both COVID-19 and Brexit (see 'Brexit preparations' below).

The Budget has been prepared on the assumption that there will be no bilateral trade deal between the UK and EU. This would mean that the UK and the EU will trade on World Trade Organisation (WTO) terms in 2021.

The Budget provides €340 million for Brexit measures.

Funding will be provided to put in place the controls and checks needed for agri-food exports to, and imports from, Britain from 1 January 2021.

Compliance funding will be available to carry out work at ports and airports. An additional 500 staff will bring the total number of staff to 1,500 for carrying out checks.

Expenditure of €100 million has been provided to departments for Brexit supports including:

• €8m for new market surveillance and certification
• €15m to help businesses respond to changes to customs and tariffs
• €7m to help the food processing industry adapt
• €11m for Local Enterprise Offices to work with local businesses
• €675,000 for InterTrade Ireland to provide practical help to businesses trading cross-border

A new Recovery Fund of €3.4 billion will allow for specific measures in response to Brexit and COVID-19 to be introduced as needed. It will focus on three main areas: infrastructure development, reskilling and retraining, supporting investment and jobs. This fund will be held in reserve and allows for flexibility, especially for Brexit provisions where there is still uncertainly around the outcome of negotiations

Income tax

There are no changes to the standard or higher rate income tax bands.

The Earned Income Tax Credit for the self-employed will increase from €1,500 to €1,650. This increase will also be applied for the 2020 tax year.

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

Universal Social Charge (USC)

The ceiling of the 2% band will increase from €20,484 to €20,687, so that the salary of a full-time worker on the minimum wage will remain outside the higher rates of USC.

The weekly income threshold for the higher rate of employer’s PRSI will increase from €394 to €398 to ensure that there is no incentive to reduce the working hours for a full-time employee on the increased minimum wage.

Medical card holders will continue to pay a reduced rate of USC until the end of December 2021.

Excise duties

From midnight on 13 October 2020, the excise duty on a packet of 20 cigarettes will increase by 50 cent (including VAT) with a pro-rata increase on other tobacco products.

Carbon tax

The carbon tax on fuel will increase by €7.50 from €26 per tonne to €33.50 per tonne. The increase will apply to auto fuels from midnight on 13 October 2020 and to solid fuels from May 2021. See 'Environment' below for more details.

Vehicle Registration Tax (VRT) and motor tax

New rates tables for VRT and motor tax will be introduced. The CO2-based VRT and motor tax regimes will be replaced with the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions system from January 2021. See 'Transport' below for details of changes to VRT and motor taxes.

Remote working tax credit

The cost of broadband may be covered as an allowable home expense for tax relief for e-working. Other vouched expenses may also be covered where they are “wholly, exclusively and necessarily” part of the employees work and the employer does not make payment towards the expense. Further information will be available shortly from Revenue.

Debt warehousing for self-assessed taxpayers

The tax debt warehousing scheme will be extended to taxpayers who self-assess for income tax that are adversely impacted by Covid-19. Impacted taxpayers who cannot pay their 2019 balance and preliminary tax for 2020 can defer payment for 12 months. If income for 2021 is also at least 25% lower than income for 2019, the balance of 2020 balance and 2021 Preliminary Tax can also be warehoused. Debts that are warehoused are subject to 0% interest for 12 months. After this 12-month period, a reduced interest rate of 3% per annum will apply and no surcharge will apply.

Other taxation measures

Revised CGT entrepreneur’s relief

The holding requirement under the CGT Entrepreneur Relief will be amended. An individual who held at least 5% of the shares for a continuous period of any 3 years qualifies. This will come into effect from 1 January 2021.

Consanguinity relief

Consanguinity stamp duty relief for family farm transfers is being maintained at 1% for a further 3 years until 31 December 2023.

The total social protection budget in 2021 will be €25.126 billion, of this €3.18 billion is COVID-19 related expenditure.

Social welfare payments

There will be no increase in weekly social welfare payments.

COVID-19 Pandemic Unemployment Payment (PUP)

An earnings threshold of €480 per month will be introduced for self-employed people getting PUP to allow them to take up occasional work opportunities and keep their PUP.

Self-employed people who resume their business on a limited or reduced basis when they leave PUP will be eligible for the Part-Time Job Incentive scheme.

Christmas Bonus

A Christmas Bonus of 100% will be paid in early December 2020 to people getting a long-term social welfare payment (minimum payment €20).

The bonus will also be paid to people getting PUP and jobseeker’s payments for at least 4 months.

Payments to families

The weekly rate for a qualified child will increase by €2 from €36 to €38 for children under 12 years of age. It will increase by €5 from €40 to €45 for children aged 12 years and over (from January 2021).

The One-Parent Family Payment earnings threshold of €425 will be removed (from April 2021).

Working Family Payment income thresholds will increase by €10 per week for families with up to 3 children (from January 2021).

Parent’s Benefit will be extended by 3 weeks from 2 weeks to 5 weeks for parents of children born or adopted from November 2019. The period it can be taken will be extended up to your child's second birthday or within 2 years following adoption (from April 2021).

The Widowed or Surviving Civil Partner Grant will increase by €2,000 from €6,000 to €8,000 (from January 2021).

Disability and illness payments

The number of waiting days for Illness Benefit will be reduced from 6 days to 3 days on new claims (from the end of February 2021).

The earnings disregard for Disability Allowancewill increase by €20 per week from €120 to €140 per week (from June 2021).

A grant of up to €500 to buy hearing aids and up to €100 towards repairs will be provided under the Treatment Benefit Scheme without requiring a matching payment by the claimant (from April 2021).

State pension age

The qualifying age for a State pension will continue to be 66. Legislation will be introduced later in 2020 to reverse the increase in pension age to 67 currently included in social welfare legislation.

Fuel Allowance

The Fuel Allowance will increase by €3.50 per week from €24.50 to €28 (from January 2021).

Living Alone Increase

The Living Alone Increase will increase by €5 per week from €14 to €19 (from January 2021).

Increase for living on a specified island

The Increase for living on a specified island will increase by €7.30 from €12.70 to €20 per week (from January 2021).

Carers

The Carer’s Support Grant will increase by €150 from €1,700 to €1,850 per year (from June 2021)

Employment supports

Employers currently pay 11.05% Class A employer PRSI on weekly earnings over €394. This will increase to €398 (from 1 January 2021)

€10 million will be provided for employment supports for people who are unemployed, with specific focus on youth unemployment.

The training support grant of €1,000 will be extended to jobseekers with disabilities who avail of the Employability Service. This payment will help support access to the workplace.

An additional €4 billion is provided for health services to continue the COVID-19 action plan and increase long-term capacity, including:

• An extra 1146 acute beds
• An increase in permanent adult critical care beds to 321 (from 255 pre-COVID)
• 1,250 community beds, including 600 new rehabilitation beds
• 5 million additional homecare hours and the establishment of a National Homecare Office
• 100,000 additional inpatient and day care procedures

16,000 additional posts will be created in the health sector.

Mental health funding of €38 million will help meet to demand for services due to COVID-19 and to progress the mental health strategy Sharing the Vision.

An additional €10 million is allocated to support hospices and palliative care services.

€11 million is provided for new COVID-19 initiatives for people who are homeless.

Disability measures

€100 million will be provided for disability measures including:

• Supports and services for 1,700 school leavers with a disability
• A new innovation fund to support integration of people with a disability
• The resumption of day services
• Increased personal assistant hours
• Additional funding for respite services

A total of €1,128 million is allocated to the Department of Enterprise, Trade and Employment in 2021.

Additional funding will be given to existing supports for businesses impacted by COVID-19 such as the Credit Guarantee Scheme, Sustaining Enterprise Fund and the Online Retail Scheme.

The Earned Income Tax Credit for self-employed people will increase from €1,500 to €1,650. This increase will also be applied for the 2020 tax year.

Parents leave and Parents' Benefit will be extended by 3 weeks from April 2021 to allow parents to spend more time with their baby. The period it can be taken will be extended up to your child's second birthday or within 2 years following adoption. It is available to both parents.

From 1 January 2021, the weekly income threshold for the higher rate of employer’s PRSI will increase from €394 to €398.

COVID-19 supports

The Employment Wage Subsidy Scheme will continue until 31 March 2021. Supports under a similar scheme are likely to continue from 1 April 2021. The Government has applied to the EU SURE fund (the European Instrument for Temporary Support to Mitigate Unemployment Risks) for additional funding. This fund is part of the European response to help protect jobs and workers affected by COVID-19.

Any employer who received excess amounts of the Temporary Wage Subsidy Scheme must refund the overpayment to Revenue. An employer may be unable to repay the overpayment immediately, due to the impact of Covid-19 on their business, and the existing tax debt warehousing scheme will be expanded to include these repayments.

The Covid Enterprise Support Grant payments have been extended until 31 March 2021. The grant is worth up to €1,000 and is aimed at sole traders who got the Government’s Restart Grant Plus.

The waiving of commercial rates due to local authorities has been extended until the end of 2020 to support businesses impacted by COVID-19.

Other COVID-19 supports include:

• €39 million in continued access to low cost loans for business
• €30 million for applied research in the pharmaceutical and healthcare industry
• €10 million to help businesses move online with the Online Retail Scheme

COVID Restrictions Support Scheme (CRSS)

A new COVID Restrictions Support Scheme (CRSS) has been set up, aimed at businesses impacted by Covid-19 restrictions.

Qualifying businesses can apply to Revenue for a cash payment. The maximum weekly payment will be €5,000. The scheme is aimed at those in the accommodation, food and arts, recreation and entertainment sectors. If the Government decides to move to a higher level of restrictions then other sectors may qualify.

The scheme will run from 13 October 2020 until 31 March 2021.

The following measures will apply:

• Payments will be made when Level 3 restrictions or higher are in place in line with the Plan for Living with COVID-19
• Businesses will qualify where government restrictions directly prohibit or restrict customer access to their premises
• Payments will be calculated on the basis of 10% of the first €1 million in turnover and 5% thereafter, based on average VAT exclusive turnover for 2019
• A self- assessment of 80% disruption in turnover will be required

VAT rate

From 1 November 2020, the VAT rate for the hospitality and tourism sector will decrease from 13.5% to 9%. This will also apply to various entertainment services such as admission to cinemas, theatres, museums, fairgrounds and amusement parks. VAT at 9% will also apply to hairdressing and certain printed materials such as brochures, maps and programmes.

Gaming industry

A tax credit for the digital gaming sector will be developed from January 2022.

Film Tax Credit

Section 481 (Film Tax Credit) Regional Uplift scheme will be amended. The peak rate of 5% will be in place until December 2023.

Tourism, Culture, Arts, Gaeltacht, Sport and Media

A total of €1,082 million is allocated to the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media in 2021. €50 million is being allocated to supports for the live entertainment industry.

Knowledge Development Box relief

The Knowledge Development Box relief is being extended for a further 2 years until 31 December 2022.

Employment and Investment Incentive Scheme (EII)

The Government will assess how the Employment and Investment Incentive Scheme can be enhanced during COVID-19

Corporation Tax

There will be no change to the corporation tax rate of 12.5%.

Brexit response

€100 million to help businesses adapt to Brexit

€8 million to start a new market surveillance and certification, required even if a Free Trade Agreement is in place.

€15 million to support businesses to respond to changes to customs and tariffs.

€7 million to help the food processing industry adapt.

€11 million for Local Enterprise Offices.

€675,000 for InterTrade Ireland to provide practical help to businesses trading cross-border.

Recovery-focused investments

€10 million for the IDA to develop advanced factories and industrial estates for companies seeking to invest in Ireland especially outside of Dublin.

€30 million for regional enterprise centres for initiatives to create jobs.

€6.6 million for an Advanced Manufacturing centre in Limerick.

€3 million for network of Digital Hubs to help SMEs.

Primary and post-primary schools

The Department of Education allocation is €8.8 billion in 2021.

Additional teaching posts will allow the pupil/teacher ratio for primary schools to reduce to 25:1 from September 2021.

There will be 403 additional teaching posts to support children with special needs.

A further 990 Special Needs Assistants (SNAs) will be recruited, bringing the total number to over 18,000 in 2021.

An additional 80 occupational, speech and language and behavioural therapists and 30 educational psychologists will be recruited to support students with special education needs.

Additional funding has been allocated to provide hot school meals for up to 35,000 extra children in 2021.

€232 million will be available for schools to operate safely during COVID-19 including PPE and school transport services.

Child and family support

The Department of Children, Equality, Disability, Integration and Youth allocation is €1.9 billion in 2021.

Additional funding of €61 million is allocated to Tusla to reduce the number of children awaiting the allocation of a social worker, address cost pressures in residential and foster care and transfer unaccompanied children in Greece to Ireland.

Funding for youth services, including commitments to the LGBT+ National Youth Strategy Actions, will increase by €5 million in 2021.

Higher education, further education and skills

The Department of Further and Higher Education, Research, Innovation and Science allocation is €3.3 billion in 2021.

The fee grant for postgraduate students will increase by €1,500 from €2000 to €3,500 and the income eligibility threshold will be adjusted.

The majority of college will be online for this semester and financial assistance will be provided through a €50 million fund. Work will be undertaken on how this once-off fund will operate.

200 additional places will be available through the 1916 Bursary fund.

There will be 1,500 new places on Springboard courses.

There will be 4,000 new apprenticeship training places. The apprenticeship incentivisation scheme for employers will be extended to end of June 2021.

An €8 million Digital Capability Fund for vulnerable learners.

Over 10,000 upskilling and reskilling opportunities will be available through SOLAS and Skillnet Ireland, including the Skills to Advance and Skills to Compete programmes.

The Department of Environment, Climate and Communications has been allocated €771 million in 2021.

Carbon tax

Carbon tax has been increased by €7.50 per tonne, from €26 per tonne to €33.50 per tonne. This applies to auto fuels from midnight on 13 October 2020. The carbon tax increase will apply to all other fuels (including household fuels) on 1 May 2021.

Carbon tax will increase by €7.50 every year until 2029 and then by €6.50 in 2030, bringing carbon tax to €100 per tonne by 2030. €100 million of the carbon tax revenue collected will be invested in increasing the energy efficiency of our homes, including expanding the Warmer Homes Scheme and providing for new energy efficiency schemes such as the National Home Retrofit Scheme. A new National Retrofit Office will be established in the Sustainable Energy Authority of Ireland (SEAI).

The tables below show the estimated price increases on commonly-used fuels:

Warmer homes

€221.5 million in capital funding has been provided for residential and community retrofit programmes. Of this allocation, €109 million is provided to support lower income households to retrofit their homes.

The balance of the residential and community retrofit budget (€112.5 million) will be spent on expanding existing SEAI grant schemes and introducing new schemes.

Other announcements

€3 million in capital funding has been allocated for the Community Renewable Electricity Support Scheme (RESS) to stimulate locally-owned community energy projects.

€23.5 million has been allocated for the Landfill Remediation Programme for the remediation of environmentally-degraded discontinued landfill sites operated by local authorities, and private landfills taken into State ownership.

A total of €3.3 billion is allocated to the Department of Housing, Local Government and Heritage for housing in 2021.

Buying a home

The additional measures announced in the July Stimulus for the Help to Buy Incentive have been extended to the end of 2021.

€110 million is allocated for a new national Affordable Purchase Shared Equity Scheme for first time buyers and a new funding model to accelerate the delivery of approximately 400 cost rental homes through the approved housing body sector.

Social housing support

Capital funding of €2.8 billion has been allocated for social housing in 2021 to include the delivery of 12,750 new social homes through build, acquisition and leasing programmes. This includes 9,500 new builds.

Funding for the Housing Assistance Payment (HAP) scheme will increase by €78 million to €558 million in 2021 to provide for 15,000 new HAP tenancies, as well as supporting the 59,000 households already on the HAP scheme by the end of 2020.

Funding of €133 million will allow a further 800 new households to be supported under the Rental Accommodation Scheme (RAS) in 2021, along with the ongoing cost of supporting over 17,500 households already in the RAS scheme.

Funding of €15.5 million is allocated for the delivery of Traveller accommodation.

Funding of €65 million is provided to retrofit 2,400 social housing homes to a Building Energy Rating (BER) of B2. This includes €15 million provided from the proceeds of carbon tax which will be carried over from 2020 to complete deep retrofitting of social homes in the midlands.

Supports for homeless people

Funding of €218 million has been made available for homeless services in 2021. This will support local authorities providing emergency accommodation and other services and help people to exit homelessness to tenancies as quickly as possible.

€38 million is allocated to the Local Infrastructure Housing Activation Fund to support the provision of infrastructure to facilitate the delivery of private, social and affordable homes.

Regeneration, adaptations and remediation

Funding of €150 million is being provided for the Urban and Regeneration Development Fund. This includes €84 million in carry-over from 2020. The fund is intended to help to rejuvenate significant but underused areas and economically disadvantaged in Ireland’s 5 cities and other large towns.

€60 million is provided to deliver over 10,700 grants to adapt the homes of older people and people with a disability.

Funding of €40 million is provided to support the remediation of homes affected by pyrite under the Pyrite Remediation Scheme and to support a grant scheme for homes in Donegal and Mayo affected by defective concrete blocks.

Funding of €13 million will support the remediation of over 1,000 voids (vacant dwellings in need of repair) in 2021.

Private rented housing

The Residential Tenancies Board will receive increased funding of €2 million in 2021 to help support the RTB’s Dispute Resolution Service and the investigation of breaches of rental law.

Stamp duty

There will be changes to the Stamp Duty Residential Development Refund Scheme, which is due to expire on 31 December 2021. The scheme allows for a refund on a portion of the Stamp Duty you paid for non-residential (agricultural) land, where you subsequently develop the land for residential use.

A total of 3.5 billion was allocated to the Department of Transport (an additional €1 billion).

This includes funding for:

• BusConnects, MetroLink and the DART expansion programme
• An extra 41 InterCity rail carriages
• Up to 600 extra electric or battery powered electric carriages as part of DART +
• Major road projects under Project 2040
• A range of Greenway and active travel projects
• Electric Vehicles (EVs) and related charging infrastructure - including an EV marketing campaign run by the Sustainable Energy Authority of Ireland (SEAI)
• Funding for regional airports
• A new Safe Routes to School programme to deliver safe walking and cycling routes to school, and expand the availability of safe bicycle parking on school grounds

Motor tax

A third rate of motor tax is being introduced for cars registered from 1 January 2021 to take account of the introduction of the ‘Worldwide Harmonised Light Vehicle Testing Procedure’ (WLTP).

Minor changes will apply to the existing rates table for cars taxed on CO2 emissions (cars first registered between July 2008 and end 2020). Pre-2008 cars, which do not have CO2 emissions information, will continue to be taxed according to engine size. There are no changes to the rates table for these cars.

VRT

VRT on category A vehicles (cars and SUVs) will be calculated based on their CO2 emissions. These will be measured according to the WLTP system. New VRT rates will apply too and will be published by Revenue in the coming days.

The nitrogen oxide (NOx) emissions-based surcharge introduced in Budget 2020 has been adjusted. The band has been changed to ensure that vehicles emitting higher levels of NOx levels will pay more.

The VRT relief for hybrid (and plug-in hybrid) vehicles will expire on 31 December 2020 and there will be tapered relief for battery vehicles.

The €5,000 relief for electric vehicles (EVs) will be kept in full for all EVs with an open market selling price of up to €40,000. Above €40,000, the relief will be reduced and there will be no relief for vehicles with an open market selling price over €50,000.

The Department of Justice will get €3 billion in funding for 2021. This includes funding for:

• An extra 620 Garda recruits
• An extra 500 Garda staff
• Increased protection for vulnerable witnesses in the investigation of sexual offences
• €27 million for COVID-19 related measures
• €6 million for personal protective equipment (PPE) and other related costs of preventing the spread of COVID-19 in prisons
• Security, crowd management and the leasing of locations for courts to operate safely
• €2 million for extra staff for the Data Protection Commission
• €2 million in extra funding for the Legal Aid Board
• €4.4 million in extra funding for Forensic Science Ireland
• €2.7 million to support victims of domestic abuse, including witnesses
• Increased capacity to clear a backlog of applications for Criminal Injuries Compensation
• €42 million for modernisation of the justice sector, including increased investment in digital communications

The Rainy Day Fund of €1.5 billion will be used in full.

€15 million in capital funding is provided to support:

• The Rural Regeneration and Development Fund
• The Town and Village Renewal Scheme, including investment in digital hubs
• The Outdoor Recreation Infrastructure Scheme

€210 million is allocated for the rollout of the National Broadband Plan (NBP).

Funding of €500 million will be provided for the Shared Island Initiative over the next 5 years. This will foster new investment and development opportunities and support the delivery of the cross-border projects set out in the Programme for Government.

The introduction of well-being budgeting will be progressed in the National Economic Plan. The Plan is expected to be published next month (November).