In summary, the tax changes have been set out and the relevant details are as follows:

• Income levy - the levy introduced last year has been doubled with the entry levels to each band being reduced.
  With effect from 1st May, they will be:
  

  Income	Levy
  €15,028 - €75,036	2%
  €75,036 - €174,980	4%
  Over €174,980	6%

  
   
• PRSI - the employee PRSI ceiling has increased from €50,700 to €75,036 with effect from 1st May. There has been no change to employer PRSI.
   
• Health Levy - the health levy rates will double to 4% and 5% with effect from 1st May. The entry point to the higher rate will be €75,036.
   
• Mortgage interest relief - this will be discontinued for any mortgage over 7 years from 1st May.
   
• Interest relief for residential rental properties - the level at which interest re-payments can be claimed against tax for residential rental properties has been reduced from the current 100% to 75%. This does not apply to commercial properties.
   
• Deposit Interest Retention Tax - the Minister announced an increase in the rate of DIRT from 23% to 25% on regular deposits and to 28% on certain other savings products.
   
• Capital gains tax - the rate of CGT has been increased from 22% to 25% for disposals made after midnight on 7th April 
   
• Capital acquisitions tax - similarly, the CAT rate has been increased from 22% to 25% for gifts or inheritances made after midnight on 7th April 2009, and the current thresholds have been reduced by 20% to the following:
  

  Group A - parent to child	€434,000
  Group B - related persons	€43,400
  Group C - unrelated persons	€21,700

  
   
• Residential development land - the special 20% rate applied to trading profits from dealing in or developing residential development land is being abolished. Any income arising from this will be charged at the marginal rates of income tax or in the case of companies the 25% rate of corporation tax. This will apply for the 2009 year of assessment and subsequent years and, for companies, for accounting periods ending on or after 1st January this year.  
   
• Insurance policies - a new levy on life assurance is being introduced at the rate of 1% on premiums and the current non-life insurance levy of 2% is being increased by 1%. The changes will take effect on all premiums received by the insurer on or after 1st June. 
   
• Stamp Duty "Trade-in" scheme - in a departure for this Budget, it was announced that there would be the establishment of a stamp duty "trade-in" scheme, under which no stamp duty will be payable by a person who accepts a traded-in property in exchange or part exchange for a new house/apartment.
   
• Capital Allowances - There will be a new tax relief on capital expenditure incurred in the acquisition of intellectual property.Capital allowances for both private hospitals and nursing homes are to be abolished, with transitional arrangements being put in place for projects that are at an advanced stage of development.
   
• Excise duties - the duty on a packet of cigarettes is being increased by 25% and the tax on diesel is being increased by 5c a litre, but there are no further increases on petrol or any on alcohol.
   

Having said that, there are two areas that should form part of everyone's thinking over the next eight months:
Pensions
The principal Round Tower still available is pension funding. There have been no direct changes to the pensions' regime, so no further attack on salary limits or a tax on pension tax-free lump sums. If anything, the other changes made today encourage further pension funding, such as:

• The income levy hits personal pension contributions because such contributions are not deductible from the levy. However, this is not the case with company contributions, on which the levy has no impact.
• The increases in CGT and DIRT mean that the tax-free growth of pension funds compares even more favourably to non-pension investment.

Capital Tax Planning
Beyond pension funding, as a result of what the Minister said today, planning should be to the fore of everyone's mind before the next Budget in December. The potential exists for that budget to erode many of the reliefs that are currently available in the areas of gift and inheritance tax and capital gains tax; this could effects areas such as transferring businesses and passing assets on to the next generation. The importance of reviewing your circumstances at this juncture cannot be stressed enough - it may be the case that a more tax efficient method of restructuring your business and passing assets to the next generation will not exist for many years.

 

 

 

 

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