USC The reductions in the USC rates is welcome as anyone earning €13,000 to €70,044 will benefit from the reduced rates. There is a total exemption from USC if your total income is less than €13,000.

For everyone else, depending on your income level the new rates of 1%, 3%, 5.5%, 8% and 11% will apply from 1 January 2016. The budget did not remove the discrimination in the USC system between the employed and self-employed as it retained the 11% rate for non-employment income over €100,000. Medical card holders and those aged 70 or over with income up to €60,000 continue to pay at a reduced rate and the new maximum rate is 3%.

Earned Income Tax Credit

The earned income tax credit of €550 is a tax credit for the self-employed. While it is welcome it is substantially less than the €1,650 PAYE credit that is available for employees.

Marginal Rate For income up to €70,044 the marginal rate of tax will be up to 49.5%. For persons with income over €70,044 the marginal rate did not change; for the self-employed the marginal rate remains up to 55% and for those with employment income up to 52%.

CGT on disposal of a business The reduced capital gains tax rate from 33% to 20% on a lifetime limit of €1,000,000 on a disposal of a business or part of a business is to be welcomed. Although we will have to wait the detail in the Finance Act to see what conditions may be attached to benefit from the reduced rate. This reduced rate is due to commence on 1 January 2016.

Start-up Relief For new start-up companies there is relief from corporation tax on trading income for the first 3 years. This relief has been extended and will apply to new start-up companies until the end of 2018.

KDB A Knowledge Development Box that will comply with OECD requirements has been announced. Corporation tax on profits resulting from the qualifying research and development will be taxed at 6.25%. Again we will have to wait for the Finance Bill to get more details.

CAT The increase in the tax free amount that a child can receive as a gift or inheritance from a parent from €225,000 to €280,000 is a welcome move to reduce capital acquisition tax. This will apply immediately for gifts or inheritances taken on or after 14 October 2015.

Agri Sector For the agri sector and farmers a number of the existing reliefs and exemptions have been extended until the end of 2018. To facilitate the transfer of farms a new partnership scheme has been introduced but it is subject to EU State Aid approval. If approved, it will allow two people to enter into a farm partnership and share profits with a transfer of the farm at the end of a set period. The set period cannot be more than 10 years. An income tax credit of up to €5,000 will also be made available to this new farm partnership for a 5 year period. We await the Finance Bill that is due to be published on 22 October 2015 to provide the detail on all of the Budget 2016 announcements.

Please contact us to discuss your taxation requirements.

Disclaimer: The material in this article is for general information purposes only and does not constitute legal or taxation advice. Specific legal and taxation advice should be sought before acting. All information and taxation rules are subject to change without notice. No liability whatsoever is accepted by M. McLoughlin & Co. for any action taken in reliance on the information in this article.