A snapshot of personal tax changes in Budget 2018.
In an anticipated and welcome change, the minister announced that the level of income at which people begin to pay the marginal rate of income tax of 40% is to be increased for 2018. The increase of €750 will result in a single person reaching the higher income tax rate at a level of €34,550. Single-income couples, married or in a civil partnership, will reach the higher tax rate at income levels of €43,550. The maximum annual benefit of this change amounts to €150.
The earned income credit was introduced from 2016 to reduce the differential in taxes payable by employed and self-employed individuals. The minister announced that the credit for 2018 will increase by €200 to €1,150. Although this is more than double the level of €550 at which it was originally introduced, it is still €500 lower than the PAYE tax credit of €1,650 that is available to employees. On a related note, there has been no equalisation of self-employed and employee PRSI.
Continuing a trend from the last two Budgets, the home carer credit is to be increased for 2018. This year’s change will see the full credit increase by €100 to €1,200 for the year. The full credit will be available where the carer’s income (excluding Carer’s Benefit and Carer’s Allowance) is €7,200 or less, with a tapering credit available to those with income between €7,200 and €9,600.
Mortgage interest relief is generally only available in respect of owneroccupied residential mortgages drawn down between 1 January 2004 and 31 December 2012. The relief permits a tax deduction for between 15% and 30% of qualifying mortgage interest and is also subject to a ceiling ranging from €3,000 to €20,000 depending on the year in which the mortgage was drawn down. The relief was due to terminate at the end of 2017. However, on Budget Day last year, the former Minister for Finance, Michael Noonan, signalled that mortgage interest relief would be extended to 2020. Minister Donohoe today confirmed that this extension will be by way of a tapering provision to phase out the relief between 2018 and 2020. The relief for each of those years will be 75%, 50%, and 25% respectively of the existing relief available in 2017. As lenders operate this relief at source, they will undoubtedly face operational challenges in ensuring that their systems are appropriately updated to reflect this measure by 1 January 2018.