Tax Rates and Tax Bands BUDGET SUMMARY 2007 The tax rates and tax bands have been changed as follows: The standard rate tax band (20%) has been widened and the higher rate of tax has been changed from 42% to 41%. INCOME TAX The table below sets out the tax rates and bands. In his Budget Statement on 6 December 2006, the Personal 2006 2007 Minister for Finance announced a number of changes to Circumstances ? ? the personal tax system. Single/Widowed without 32,000 @ 20% 34,000 @ 20% Tax Credits dependant Balance @ 42% Balance @ 41% children The table below outlines the main tax credits for 2007 Single/Widowed with changes, if any, indicated. qualifying for 36,000 @ 20% 38,000 @ 20% One Parent Balance @ 42% Balance @ 41% Tax Credit 2006 ? 2007 ? Family Tax Single Person 1,630 1,760 Credit Married person 3,260 3,520 Married Couple 41,000 @ 20% 43,000 @ 20% PAYE Credit 1,490 1,760 one spouse with Balance @ 42% Balance @ 41% Widowed person (without 2,310 Income dependant children) 2,130 Married Couple 41,000 @ 20% 43,000 @ 20% One Parent Family Credit 1,630 1,760 both spouses with increase of with increase of Incapacitated Child Credit Max 1,500 3,000 with Income 23,000 max. 25,000 max. Blind Tax Credit Balance @ 42% Balance @ 41% Single person 1,500 1,760 One Spouse Blind 1,500 1,760 Exemption Limits Both Spouses Blind 3,000 3,520 The exemption limits for persons aged 65 years and over Widowed Parent have been increased as indicated in the table below: Bereaved in 2006 - 3,750 2005 3,100 3,250 Personal 2006 2007 2004 2,600 2,750 Circumstances ? ? 2003 2,100 2,250 Single/Widowed 2002 1,600 1,750 65 years of age 17,000 19,000 2001 1,100 - & over Age Tax Credit Married Couple Single/Widowed 250 275 65 years of age 34,000 38,000 Married 500 550 & over Dependent Relative 80 80 The limits for Single/Widowed persons aged under 65 and Married couples aged under 65 remain unchanged at The following relief has not changed: ?5,210 and ?10,420 respectively. Relief 2006 2007 Marginal Relief will continue to apply where income does ? Max ? Max not greatly exceed the relevant exemption limit. Employing a Carer 50,000 50,000 The above exemption limits are increased by ?575 for each of the first two dependent children and by ?830 for the third and subsequent children. Changes to Standard Rated Reliefs are as follows: Deposit Interest Retention Tax (DIRT) Relief 2006 2007 Individuals exempt from income tax over 65 years of age ? Max ? Max or permanently incapacitated will, in future, be entitled to Rent Tax Relief receive deposit interest without deduction of DIRT on giving appropriate notification to the financial institution. Single - under 55 1,650 1,800 Further details will be announced. Married/Widowed - under 55 3,300 3,600 Single - 55 & over 3,300 3,600 Tax Relief at Source – Mortgage Interest Relief Married/Widowed - 55 & over 6,600 7,200 The current annual ceiling on the amount of interest that Trade Union Subscriptions 300 300 can be allowed on a mortgage is being doubled for first- time buyers from ?4,000/?8,000 single/married to Service Charges ?8,000/?16,000 single/married. The increased relief will A maximum of ?400 tax relief is granted (at 20% tax rate) be available to all first-time buyers who are in the first in 2007 for charges paid in the year 2006. seven years of their mortgage. Rent-a-Room Scheme The ceiling for non-first-time buyers is also being From 1 January 2007, it is proposed to close off use of the increased, from ?2,540/?5,080 single/married to Rent-a-Room Scheme where the rent received is from ?3,000/?6,000 single married. connected persons who in turn are claiming rent relief.
PRSI & HEALTH CONTRIBUTIONS VAT Cash Accounting Threshold The annual VAT cash accounting threshold for businesses The following changes are effective from 1 January 2007: is being increased from ?635,000 to ?1,000,000 with effect from 1 March 2007. Employee’s Annual Earnings Ceiling The employee’s annual earnings ceiling (above which they Less Frequent VAT Returns for Smaller Businesses pay no social insurance contributions) is being increased For smaller businesses, the frequency of filing VAT returns, from ?46,600 to ?48,800. currently six per year, is being reduced with effect from July 2007. Employee Income Thresholds The threshold for employee PRSI is being increased from For businesses with a yearly liability of ?3,000 or less, the ?300 a week to ?339 a week. option of filing returns on a half-yearly basis will be available. For businesses with a yearly liability between The threshold for payment of the 2% Health Contribution ?3,001 and ?14,400, the option of filing returns every four is being increased from ?440 a week to ?480 a week. months will be available. An additional 0.5% Health Contribution is being introduced VAT Relief for Conferences on earnings exceeding ?1,925 per week (equivalent to A specific measure, which will allow deductibility of VAT on ?3,850 per fortnight and to ?8,342 per month). conference-related accommodation expenses, will be introduced during 2007. Full details will be set out in the The annual earnings threshold for the Health Contribution Finance Bill. is being increased from ?22,880 to ?24,960. Reduction of VAT rate on Child Car Seats Employee's PRSI-Free Allowance The VAT rate on child car seats will be reduced from 21% The PRSI-Free Allowance for employees in Classes A and to 13.5% with effect from 1 May 2007. H with weekly earnings of more than ?339 remains at ?127 per week and at ?26 per week for all employees in FARMING TAXATION Classes B, C and D. The Farmer’s Flat Rate Addition For full details of PRSI and Health Contribution changes The rate of the flat rate addition payable by VAT please visit www.welfare.ie/publications/anprsi2007.html registered traders on purchases from non-VAT registered farmers has been increased from 4.8% to 5.2% with Childminding Relief effect from 1 January 2007. The existing exemption limit of up to ?10,000 per annum on gross income from childminding where an individual Livestock VAT Rate minds up to three children, in the minder’s own home, is The rate of VAT on sales of livestock by VAT registered being increased to ?15,000 farmers and other businesses remains at 4.8% Specified Rates for Preferential Home Loans and Stock Relief Other Loans The existing stock relief for farmers and the special An employee in receipt of a preferential loan is charged incentive stock relief for certain young trained farmers are income tax on the difference between the interest actually being extended from 1 January 2007 for a further 2 years paid and the amount which would have been payable at subject to clearance with the European Commission. the “specified” rates of interest for the loans. To reflect increases in interest rates, the specified rate in respect of Leased Farmland Exemption home loans is being increased from 3.5% to 4.5% and the The existing scheme of exemption for income from specified rate in respect of other loans is being increased qualifying leases is being amended. From 1 January 2007, from 11% to 12%. These changes will take effect from 1 a new exemption of ?20,000 per annum will be introduced January 2007. for leases of 10 years or more duration, subject to clearance with the European Commission. Tax Clearance Certificate Threshold The transaction threshold which triggers the requirement Capital Allowance for Milk Quota for a tax clearance certificate for the award of a public Relief is being made available for quota purchased under sector contract or grant is being increased from the the new Milk Quota Trading System. current ?6,500 to ?10,000, with effect from 1 January 2007. Capital Allowances (and Expenses) for Business Cars VAT The car value threshold for business cars is being increased from ?23,000 to ?24,000. VAT Registration Threshold for Enterprises The VAT registration thresholds for businesses are being In the case of corporation tax the new threshold will apply increased from ?27,500 to ?35,000 in the case of services, for expenditure incurred in an accounting period ending on and from ?55,000 to ?70,000 in the case of goods. These or after 1 January 2007. In the case of income tax, the increases will take effect from 1 March 2007. new threshold will apply for expenditure incurred in the basis period for the tax year 2007 and subsequent tax years.
CAPITAL GAINS TAX of a Commencement Order to be made by the Minister for Finance following such clearance. Retirement Relief The following changes were announced: STAMP DUTY The existing threshold is being increased from ?500,000 Mortgages to ?750,000 from 1 January 2007. Stamp Duty on mortgages is being abolished for mortgage deeds executed on or after 07 December 2006. Mortgage The relief is being extended to disposals of farmland which deeds covered include primary, collateral, additional and has been leased prior to disposal. To qualify, the land equitable mortgages together with transfers of mortgages. must Farm Consolidation a. have been leased for no longer than 5 years prior The stamp duty relief for farm consolidation, contained in to disposal Section 81B of the Stamp Duties Consolidation Act 1999, b. have been owned and used by the farmer for 10 is being extended for a further 2 years to 30 June 2009. years prior to the initial letting, and The relief is also to be extended to qualifying exchanges of c. be disposed of to the person leasing the land. land where only one farmer is consolidating his/her holding where all other conditions of the relief are satisfied. This change will be included in the 2007 Finance Bill. Young Trained Farmer Relief CAPITAL ACQUISITIONS TAX The Finance Bill 2007 will include changes relating to the education criteria and refunds procedure governing the Agricultural Relief relief for young trained farmers contained in Section 81A CAT agricultural relief provides relief from CAT on 90% of of the Stamp Duties Consolidation Act 1999. the value of a gift or inheritance. In order to qualify for the relief, 80% of a farmer’s total assets (after receipt of Sporting Bodies the gift/inheritance) must consist of qualifying agricultural A new stamp duty exemption is being introduced in assets. Off-farm principal private residences are not respect of purchases of land by those sporting bodies considered such assets for the purposes of this relief. This covered by section 235 of the Taxes Consolidation Act provision is now being amended so that an individual may 1997. Full details of the exemption will be contained in the off-set borrowings on an off-farm principal private Finance Bill 2007. residence against the property’s value, for the purpose of the 80% test. These changes will be included in the 2007 EXCISES Finance Bill. The Minister announced the following changes: CORPORATION TAX Mineral Oil Tax Research and Development Tax Credit Scheme The removal of mineral oil tax from non-auto kerosene The base year expenditure against which qualifying and Liquefied Petroleum Gas (LPG), effective from incremental expenditure on R&D is measured under the midnight 31 December 2006. tax credit scheme is being fixed at 2003 levels for a further 3 years to 2009. From 1 January 2007 expenditure The changes are as follows: by companies on sub-contracting R&D work to o Kerosene (non-auto) - from ?16.00 per 1,000 unconnected parties will qualify under the scheme up to a litres to ?0.00 limit of 10% of qualifying R&D expenditure in any one o LPG (non-auto) - from ?10.00 per 1,000 litres to year. This is in addition to the existing provision in the ?0.00 scheme in relation to subcontracting to universities. It will be necessary to inform the European Commission about Tobacco Products these changes from a state aid perspective. The Minister for Finance announced an increase of 50 cent on a packet of 20 cigarettes with a pro-rata increase on Preliminary Corporation Tax the other tobacco products. The new rates, which take The corporation tax liability threshold for treatment as a effect as and from 7 December, are set out in the table small company is being increased from ?50,000 to hereunder: ?150,000 effective from preliminary tax payment dates arising after 6 December 2006. New or start-up Rates of Excise Duty on Tobacco Products companies with a CT liability of ?150,000 or less for their first accounting period will not be required to pay Description of Product Rate of Duty preliminary tax in respect of that first accounting period Cigarettes ?151.37 per thousand and will instead be required to pay their final CT liability together with an amount for that accounting period at the same time as they are equal to 17.78 per cent of required to submit their tax returns (9 months after the the price at which the end of the accounting period). This measure will come into cigarettes are sold by retail effect from preliminary tax payment dates arising after 6 December 2006. Cigars ?217.388 per kilogram Investment in Renewable Energy Generation Fine-cut tobacco for The qualifying period for the scheme of tax relief for the rolling of cigarettes ?183.443 per kilogram corporate investment in certain renewable energy projects is being extended to 31 December 2011. This extension is Other smoking tobacco ?150.815 per kilogram subject to clearance by the European Commission from a state aid perspective and will come into operation by way
BUSINESS EXPANSION SCHEME (BES) AND SEED CAPITAL SCHEME (SCS) Both the BES and the seed SCS are being renewed for seven years to the end of December 2013. The company limit for both schemes rises from ?1 million to ?2 million. The investor limit is up from ?31,750 to ?150,000 for BES and from ?31,750 to ?100,000 for the SCS. Continuation of the schemes and the proposed changes require European Commission approval. www.revenue.ie December 6 2006