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Budget 2023: Summary and Key Changes

28th September, 2022

Budget 2023 was announced yesterday against a backdrop of record inflation and an energy crisis. The total package announced in the Budget was €11bn which is well in excess of the €6.7bn figure set out in the Summer Economic Statement. In addition, there will be €300m in public service support measures, funded from the Contingency Reserve Fund.

Investment tax changes

There was no change to the Capital Gains Tax (CGT) rate or CGT reliefs. There was also no change to Fund Exit Tax. The Minister committed to establishing a working group to consider the taxation of funds, life assurance policies and other investment products including the REIT and IREF regimes. The Minister also said that he would look at Section 110 companies.

The Minister announced the introduction of a vacant Homes Tax. With some exceptions, the tax will apply to residential properties which are occupied for less than 30 days in a twelve-month period. The tax will operate on a self-assessment basis and will be charged at a rate equal to three times the prop-erty’s existing basic Local Property Tax rate.

Tax changes for business

A package worth €1.4bn was announced to support businesses deal with the energy crisis.

The Minister announced the Temporary Business Energy Support Scheme (or TBESS) which will be administered by the Revenue Commissioners. The scheme’s (subject to being approved by the EU commission) aims to assist businesses with their energy costs over the winter months. Once eligibility criteria are met, the support will be calculated on the basis of 40 per cent of the increase in gas and electricity that business are facing capped at a maximum of €10,000 a month. This scheme is worth €1.2bn.

A separate scheme (Ukraine Enterprise Crisis Scheme) aimed at firms operating in the manufacturing and/or internationally traded services sectors was announced. This scheme is worth €200m.

Personal tax changes

The total income tax package was worth €1.1bn. The majority of this package was focused on the increase of €3,200 to the standard rate band with proportionate increases for married couples and civil partners. This increase represents the biggest increase in a tax band in over a decade.

Other measures include:

  • Increasing the personal, employee and earned income tax credits have each by €75.
  • Increasing the Home Carer Tax credit by €100 to support stay at home parents.
  • Increasing the ceiling of the second USC rate band (currently €21,295) to €22,920.

Separately the Minister committed to consider the introduction of a third rate of income tax. Analysis on this is due to be completed prior to the publication of next year’s Summer Economic Statement.

Cost of living measures

Some of the measures announced include:

  • An increase in the contributory state pension of €12 per week.
  • The introduction of a rental credit of €500 per year. This credit will apply to rent paid in 2022.

  • The commitment to provide the necessary funding to support a reduction of up to 25% in the weekly fee for those availing of the national childcare scheme.

  • A once-off reduction in the Student Contribution of €1,000 for eligible students in the 2022-2023 academic year.

  • Electricity credits of €600 to be paid in three instalments to all house-holds. The first instalment is due to be paid before Christmas, with two further instalments in the New Year.

  • The extension of the 9% VAT rate for electricity and gas until 28 February 2023.

  • The extension of the 20% fare reduction on public transport until the end of 2023

Sucession planning changes

There were no changes to the Capital acquisitions tax (CAT)  rate and all three relationship thresholds (Group A, Group B, and Group C) remain the same.

A number of Agricultural Reliefs due to expire at the end of 2022 were extended.

Pension changes

While pensions appear to have emerged untouched in this year’s Budget, more detail may come in the Finance Bill due to be published in the coming weeks.

As reported in the media recently, the Minister for Social Protection announced a series of reforms to the State Pension system in Ireland. The reforms include:

  • Maintaining the State Pension age at 66 and introducing a new flexible pension age model.
  • From January 2024, people will have the option to continue working up un-til the age of 70 in return for a higher pension.

Commission on Taxation & Welfare Report

The Minister committed to reviewing the recently published report. The recommendations in the report, if introduced, would bring fundamental changes to the tax system in Ireland. However, the recommendations are not intended to be introduced overnight. Instead, they provide a road map for the government on how the taxation and welfare systems could be reformed to meet the country’s long-term needs.

Summary

We await the Finance Bill and Finance Act to determine the full impact of Budget 2023.  Irrespective of any specific tax changes our view remains the same. We believe that the key to delivering the most appropriate solution is to work with you to understand your individual circumstances and your financial goals, incorporating the potential impact of taxation to ensure you can meet your goals efficiently. In essence, our dedicated team will help you to formulate a personalised plan and investment strategy based on your unique needs and circumstances. 

Request a call

If you would like to discuss how Budget 2023 may affect you, why not request a no-obligation call with one of our Advisers today?

Talk to us

Request a call

If you would like to discuss how Budget 2023 may affect you, why not request a no-obligation call with one of our Advisers today?

Talk to us

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