Retirement Lump Sum

The Budget did not include any changes in relation to the retirement lump sum.

The first €200,000 of any retirement lump sum remains tax free with any amount between €200,000 and €500,000 subject to income tax at 20%. Any lump sum amount paid out in excess of €500,000 is taxed at the marginal rate and is also subject to PRSI and USC. Retirement lump sums taken on or after 7 December 2005 count towards an individual’s retirement lump sum limits.

Tax Relief on Pension Contributions

Income tax relief on personal contributions to a qualifying pension arrangement continues to be available at the marginal rate of tax (40% for higher rate taxpayers from 1 January 2015).

There was no mention in the Budget of a change to the earnings cap of €115,000.

Maintaining the levels of tax relief is welcome as making adequate provision for retirement is a vitally important aspect of financial planning. Making provision for retirement through a private pension arrangement remains the most tax efficient form of long term saving.

State Pension (Contributory)

The maximum personal rate of the State Pension (Contributory) remains at €230.30 per week. This is

unchanged since 2009. The earliest age at which the State Pension (Contributory) is payable is currently age 66.

 

2. Exit Tax

There was no mention in the Budget of a change to the current exit tax rate of 41% on life assurance policies effected after 1 January 2001 (known as gross roll-up policies).

 

3. DIRT (Deposit Interest Retention Tax)

There was no mention in the Budget of a change to the current rate of DIRT on savings of 41%.

4. Income Tax, PRSI and USC

Income Tax

The Government has announced a 1% reduction to the higher rate of income tax. The rate will decrease from 41% to 40% with effect from 1 January 2015.

The standard rate of income tax will remain unchanged at 20%.

The standard rate cut off point for a single person (the entry point for the higher rate of tax) will increase by €1,000 from €32,800 to €33,800.

Tax Credits

There were no changes to tax credits

Tax Rates and Bands

The following changes were confirmed in the Budget:

Personal   Circumstances	2014	2015
Single/Widowed (no dependants)	€32,800 @ 20% Balance @ 41%	€33,800 @ 20% Balance @ 40%
One Parent/Widowed Parent	Parent €36,800 @ 20% Balance @ 41%	€37,800 @ 20% Balance @ 40%
Married Couple – one spouse with Income	€41,800 @ 20% Balance @ 41%	€42,800 @ 20% Balance @ 40%
Married Couple – both spouses with Income	€41,800 @ 20% (with increase of €23,800 max) Balance @ 41%	€42,800 @ 20% (with increase of €24,800 max) Balance @ 40%

PRSI

The rate of PRSI remains unchanged.

Universal Social Charge (USC)

The Government has announced a number of changes to the USC to take effect from 1 January 2015:

• A reduction in two of the existing rates

• An increase in the USC entry point

• A new rate of 8% for income in excess of €70,044

Total income of €12,012 or less per annum is exempt from the USC.

The following USC rates will apply if total income is in excess of €12,012:

Rate	Threshold
1.5%	€0 to €12,012
3.5%	€12,013 to €17,576
7%	€17,577 to €70,044
8%	€70,044 to €100,000

The USC rate on PAYE income in excess of €100,000 is 8%.

The USC rate on self employed income in excess of €100,000 has increased from 10% to 11%.

 

5. Corporation Tax

There is no change to the Corporation Tax rate of 12.5% for trading income and 25% for non-trading income.

 

6. Capital Acquisitions Tax (CAT)

There was no mention in the Budget of a change to the current CAT rate of 33% or to the existing CAT thresholds which are as follows:

CAT   Thresholds
Group A: €225,000	Applies where the beneficiary is a child (including adopted child,   step-child and certain foster children) or minor child of a deceased child of   the disponer. Parents also fall within this threshold where they take an   inheritance of an absolute interest from a child.
Group B: €30,150	Applies where the beneficiary is a brother, sister, niece, nephew or   lineal ancestor or lineal descendant of the disponer.
Group C: €15,075	Applies in all other cases.

7. Capital Gains Tax (CGT)

The rate of CGT remains unchanged at 33%.

Legislation including the Finance and Social Welfare Bills are expected to be published in the near future and we wait to see if they contain further changes not specifically announced in the Budget.

Philip Cullen trading as Southeast Financial Services is regulated by the Central Bank of Ireland