Thursday 18 January 2018

Mortgage interest relief cut, welfare rates up €5, and a new sugar tax: The 10 important take-aways from Budget 2018

The details have finally been confirmed: here are the key points from Paschal Donohoe's Budget 2018 speech

Finance Minister Paschal Donohoe
Finance Minister Paschal Donohoe
Independent.ie Newsdesk

Independent.ie Newsdesk

FINANCE Minister Paschal Donohoe has delivered his first Budget, which has been described by some as a "dolly mixture" budget by some people. Here are the 10 talking points that everyone needs to know about after his speech.

Tax changes

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Tweaks to the tax band at which people begin paying a higher rate and a cut to two rates of USC is set to see the average worker round €250 better off each year. Meanwhile, stay at home parents are set to benefit by about €100 per year.

#HaveYourSay: Will you be better off thanks to Budget 2018?

This is due to the increase in the home carer credit to €1,200 a year.

Meanwhile for PAYE workers threshold for the higher rate of income tax to applied raised by €750 from €33,800 to €34,550.

Mr Donohoe also announced that the 2.5pc USC rate is being reduced to 2pc and the 5pc USC rate is being dropped to 4.75pc.

Minimum Wage

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The new increased national minimum wage of €9.55-an-hour won't pay the upper rates of USC.

He said the ceiling for the new 2pc rate is being raised from €18,772 to €19,372 to ensure that full-time workers won't be hit with a higher rate of USC, which would wipe out any gains.

Mortgage interest relief

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Boom-time buyers who are benefiting from mortgage interest relief will now see that cut by 25pc this year as part of a phasing out plan.

The move has been criticised by some who argue that it may lead to more people being unable to pay their mortgage.

The tax relief will be reduced by 25pc every year for the next three years.  It is expected the reduction will save the State €50m next year.

Housing supply

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Noting that the Government is acutely aware of the housing crisis Minister Donohoe announced a number of measures to address the housing crisis.

The Government also plans to provide €750m in commercial lending for home builders, which will deliver up to 6,000 homes and help struggling small and medium-sized builders who cannot secure finance.

Some €1.83bn will be spend on housing in 2018. A total of 3,800 new social houses and apartments will be built by local authorities and approved housing bodies, and an additional €149m will be spent on the Housing Assistance Payment, which is paid by the State to landlords.

The spend on homeless services will also increase by €17m to €116m.

The Government has pledged to deliver an additional 4,000 extra housing units next year.

A number of measures aimed at supply were also announced today.

On vacant homes, owners will be able to claim tax relief of up to €5,000 to bring properties back into use for rent. The vacant site levy is being more than doubled from 3”pc to 7pc, and commercial stamp duty will rise from 2pc to 6pc by midnight tonight.

Buyers of residential land will be entitled to claim back the stamp duty, provided that development takes place within 30 months of the land being purchased.

In a blow for homeowners who bought between 2004 and 2012, Mortgage interest relief will be scrapped by 2020.

Childcare

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An additional €20 million allocation in 2018 towards an extension of the Pre-School programme, allowing children of pre-school age access to a full two-years of pre-school service.

During his budget speech in the Dail today, Mr Donoghue said the government was committed to “the development of affordable quality childcare with a focus on children, parents and providers.”

In addition, the capitation rate for providers of the ECCE Pre-school programme will increase by 7 per cent from September 2018. The ECCE scheme provides early childhood care and education for children of pre-school age, not older than 5 and a-half years of age.

Social welfare

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All social welfare recipients including pensioners, job seekers and the disabled will get an extra €5 a week from the last week in March next year.

This follows a €5 increase in the maximum rate of all weekly payments for 1.5 million beneficiaries that came into force this year as part of the last budget.

Finance Minister Paschal Donohoe also said a Christmas bonus, worth 85pc of the weekly payment, will be paid again this year.

In a further boost for pensioners, the Telephone Support Allowance will rise by €2.50 a week for those living alone and receiving the fuel allowance.

Mr Donohoe also said there would be a €20 increase in the earnings disregard for the One Parent Family Payment and Jobseekers Transitional Scheme.

In addition, the threshold for the Family Income Supplement will rise by €10 a week for families with three children.

Teachers, health staff and gardaí

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Funding has been announced for an additional 800 garda recruits in 2018, while extra funding has also been made available to lower the teacher-pupil ratio to 26:1.

1,300 extra teaching posts have been announced for 2018, which will reduce pupil-teacher ratio to 26:1. Extra funding has also been made available for 1,000  additional special needs assistants.

Meanwhile the levy paid by employers toward National Training Fund is to be raised by 0.1pc next year and again in 2019 and 2020.

Health funding is to rise by just under 5pc, or €685m, bringing total funding to €15.3bn. This includes funding for 1,800 new frontline staff.

Cigarettes, diesel and sunbeds

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Crackdown: on use of sunbeds
 

The areas for traditional excise increases has produced a mixed bag this year. Cigarettes are to increase by 50c to €12 for the first time. Jowever, diesel remains untouched, as does carbon tax.

Meanwhile, Mr Donohoe announced plans to increase the VAT rate on sunbed services from 13.5 per cent to 23pc.

“This is in recognition of the clear evidence of a link between sunbeds and skin cancer, the most common form of cancer in Ireland,” Mr Donohoe said.

Alcohol excise duty is also to remain the same.

Sugar tax

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People drinking Coca-Cola at a festival (Yui Mok/PA)
 

A 30 cent tax will be applied to the most sugary drinks on sale as part of the Government’s bid to tackle obesity.

Finance Minister Paschal Donohoe confirmed that the tax on drinks containing over eight grams of sugar per 100 millilitres will be introduced next year.

A reduced tax of of 20 cent will be applied to drinks that contain between five and eight grams of sugar per 100ml, Mr Donohoe told the Dáil.

The sugar tax will be introduced in April 2018 in conjunction with the UK and Northern Ireland. The move is subject to State aid approval and was agreed following a public consultation.

Mr Donohoe estimates that the tax will net the Exchequer €40m in a full year.

Brexit

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Theresa May
 

The challenges posed by Brexit made a number of appearances in this year's Budget speech.

A ‘Brexit Loan Scheme’ is to be set up with €300m for SMEs who need to innovate to meet the challenges posed by the UK leaving the EU.

Another €25m is to be set aside for Brexit response loan scheme for agrifood sector. Meanwhile, the Minister for Agriculture gets €50m for Brexit response measures in 2018.

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