Budget 2018 was announced this afternoon and, in line with other recent Budgets, many of the proposed changes were flagged well in advance.
Some of the key changes likely to be of interest to employers are set out below:
It was announced that there would be an increase of €750 per annum in the income tax standard rate band for all earners to €34,550 for a single person or €43,550 for a married couple with one income.
For those liable to USC (i.e. earning over €13,000), the rates will reduce in 2018 on income up to €70,044 per annum and the second band will again be widened slightly. The changes which are set out below will result in a marginal tax rate on incomes up to €70,044 of 48.75% down from 49%.
|EARNINGS BAND||2018 USC RATE||CHANGE|
|First €12,012 of income||0.5%||No change|
|€12,013 - €19,372||2%||was 2.5% on income from €12,013 to €18,772|
|€19,373 - €70,044||4.75%||was 5%|
Medical card holders and those over 70 earning under €60,000 p.a. will pay a maximum rate of 2%. The differential between the USC rate for self-employed and PAYE workers earning over €100,000 remains in place.
Key Employee Engagement Programme (KEEP)
Following last year’s Budget announcement by the then Minister for Finance, Michael Noonan, Minister Donohoe has now introduced KEEP, a share-based remuneration incentive for unquoted SMEs. Gains arising to employees on the exercise of KEEP share options will be liable to Capital Gains Tax in place of income tax, USC and PRSI. This incentive will apply to qualifying share options granted between 1 January 2018 and 31 December 2023.
Benefit in Kind (BIK) incentive on electric cars
In recognition of climate change pressures, the Minister announced a 0% BIK rate for employers providing employees with electric vehicles. This measure is being introduced for a period of one year to incentivise the take up of electric cars. A comprehensive review on BIK on vehicles is to be carried out which may be reflected in the next Budget.