Budget Summary 2024

Introduction:

• Budget 2024 was a challenging one due to the economic and political backdrop.
• The Government delivered a comprehensive fiscal package with numerous measures impacting the Irish economy and society.
• The budget aims to benefit everyone slightly, but no significant advantages are offered to any particular group.
• The economy is near full capacity, but there are concerns about overstimulating it.
• Consumer price inflation averaged 7% in the first eight months of the year.
• The Government plans to increase the minimum wage from €11.30 to €12.70.
• Risks to the economy include a weak global economic outlook, volatile energy prices, rising interest rates, and tightening of monetary policy by central banks.

Political Perspective:

• Budget 2024 is significant politically as it’s the second last before the next general election in 2025.
• The Government pursued an expansionary fiscal approach with increased expenditure and some tax relief.

Key Features of Budget 2024:

• Addressed issues like inflation, rising interest rates, pressures on the rental market, and increased ECB official interest rates.
• The core package was €6.4 billion, with €1.1 billion in taxation measures and core expenditure of just under €5.3 billion.
• Additional packages included cost of living measures of €2.7 billion and non-core expenditure of €4.75 billion, totalling €14 billion.
• Taxation measures included reductions in USC rates, increased thresholds for income taxpayers, extended VAT reductions for gas and electricity, increased rent credits for private renters, energy credits for households, and changes to Capital Gains Tax Retirement Relief.
• Other measures included the introduction of a Future Wealth Fund, an Infrastructure, Climate and Nature Fund, extensions for energy-efficient equipment schemes, and no increases in VRT for the motor industry.

Additional details:

Pension Updates Budget 2024 saw no alterations concerning private pensions. However, anticipated minor pension modifications might be featured in the upcoming Finance Bill 2023. It’s believed these will encompass further actions from the Inter-Departmental Pensions Reform & Taxation Group (IDPRTG) report, like eliminating the upper age limit of 75 on PRSA’s, leading to a lifelong PRSA, and easing transfer options for Retirement Annuity Contracts/Personal Pensions.

Social Welfare Pension Adjustments From January 2024, the State Pension (Contributory) Personal Rate is set to rise by €12, moving from €265.30 weekly to €277.30.

Cost of Living Support Payments for the Year

• Three energy credits of €150 each, totalling €450, will be distributed between the end of this year and next April.
• Child benefits will be doubled.
• A Christmas bonus for social welfare payments.
• A one-time double payment of all social welfare payments in January.
• A lump sum of €400 for working family payment recipients.
• An additional €200 payment for those on the Living Alone Allowance.
• A one-off €400 payment for recipients of Carer’s Support Grant, Disability Allowance, Blind Pension, Invalidity Pension, and Domiciliary Care Allowance before Christmas.

Pension Overview No changes were made in Budget 2024 regarding:

• Employer Pension Contributions: Corporation Tax relief remains for contributions to approved Occupational Pension Schemes, within set limits.
• Employer Contributions to a PRSA: The Benefit-in-Kind Charge removal from the Finance Act 2022 remains, with no further changes in Budget 2024. No limit is set on employer contributions to an employee’s PRSA, but the individual’s overall threshold of €2m still applies.
• Tax Relief on Employee Pension Contributions: This continues at the marginal income tax rate, within set limits.
• Employer Corporation Tax: The rate stays at 12.5% for most Irish businesses. However, from 1 January 2024, a minimum effective tax rate of 15% will apply to large companies with a turnover of €750 million or more.
• Retirement Lump Sum: Up to €200,000 remains tax-free. Amounts between €200,000 and €500,000 will be taxed at 20%.
• Standard Fund Threshold: The current limit on the total capital value of pension benefits is €2 million. Exceeding this limit incurs additional tax liabilities. Adjustments to the SFT in 2024, due to the cost of living crisis, will be determined in December 2023.

Life and Taxation Insights In Budget 2024, Minister McGrath mentioned an ongoing “review of the funds sector”, focusing on a “Life Assurance Exit Tax”. The review’s results will be available next summer, after which taxation framework changes will be considered. Until then, the DIRT tax remains at 33%, the 1% Insurance Levy is still in place, and the Exit Tax rate on Life Assurance Policies and Investment Funds stays at 41% for individuals.

Income Tax Adjustments The income tax standard rate band saw an increase of €2,000 for all, with various tax credits also seeing increases.

Universal Social Charge (USC) Updates From 1 January 2024, the USC Rates & Bands will be adjusted as detailed, with the USC concession for medical card holders extended to 31 December 2025.

PRSI Changes From 1 October 2024, PRSI contribution rates will see a 0.1% increase.

Corporate Deposit Savings The corporate exit tax rate remains unchanged at 25%.

Capital Acquisition Tax (CAT) Overview No changes were made to the CAT Thresholds, and the Capital Acquisition Tax rate remains at 33%.

Capital Gains Tax (CGT) Status The Capital Gains Tax rate remains unchanged at 33%.