Lucas Financial Consulting Ltd

The aim of this budget was to reduced exchequer spending by €4 billion without increasing income and other taxes.

The main details are:

• Income tax rates remain at 20% and 41%. To recap, you pay an income levy of 2% up to €75,036pa, , 4% between €75,037 to €174,980 pa, and 6% in excess of €174,980 p.a.
• The personal income tax rates are €36,400 (Single), Married Couple (one income) €45,400, Married Couple (dual income) €45,400 @20% with an increase of €27,400 max, balance at 41%.).
• PRSI for Class A1 is 4% on first €75,036 and health levy is 4% on income up to €75,036, 5% on income greater than €75,036.
• The main tax credits are €1,830 single, €3,660 married, and PAYE €1,830.

Corporation Tax

The Minister stated that our corporation tax of 12.5% has become an international ‘brand’ and is here to stay.l and the tax treatment of pensions, including the consolidated 33% of relief will be considered in the Government’s National Pensions Framework shortly to be published by the Minister for Social and Family Affairs.

Adjustments to Public Service Pay and Pensions

The Pay of public servants will be reduced from 01/01/2010 as follows:

• A reduction of 5% on the first €30,000 of salary.
• A reduction of 7.5% on the next €40,000 of salary and
• A reduction of 10% on the next €55,000 of salary.

The Review Body on Higher Remuneration in the Public Sector recommendations have been accepted by the Minister. There will be a reduction in pay of:

• 8% for those with Salaries from €125,000 to €165,000.
• 12% for those earning €165,000 to €200,000.
• 15% for those earning €200,00 or more.

Child Benefit

• Child benefit for First and Second Children reduces from €166.00pm to €150.00 p.m.
• Third and Subsequent Children €203.00 to €187.00. These measures take effect from Jan 2010.

Job Seekers’ Allowance

There will be reduction in January 2010. Main details are:

• Age 18 and 19 personal rate of €100 p.w remains.
• 20 and 21 years present personal rate of €204.30 reduces to €100.00p.w.
• 22 to 24 years personal rate €204.30 to €150.00.
• over 25 years of age €204.30 to €196.00.

Old Age Pension

The old age pensions have not been changed. For example;

State Pension (contributory ) personal rate (under 80) is €230.30 p.w and with a qualified adult 66 or over €436.60 p.w.

New Public Service Pension Scheme

A new single scheme for all new entrants to the public service from 2010 onwards will be introduced. Main details are:

• Pensions to be based on career average rather that final salary as currently applies.
• Raising the minimum public service pension age to 66.
• The Government will consider using the CPI as the basis for post retirement increases for both existing and future pensioners. This change would reduce the actuarial cost of public service pensions from an estimated €108 billion to €87 billion.
• In developing the new scheme government will be considering a employee pension contribution of 6.5%.

National Solidarity Bond

This bond will be in addition to the current range of ‘State Savings’ products and will be available early in the New Year. The main features will be:

• Investors can choose to invest for a five, seven or ten year period.
• Interest will be paid annually.
• Investors will be entitled to a final redemption bonus on maturity as an incentive to leave their funds invested.
• It will be possible to invest in the bond by lump sum or by occasional payments.
• Full details will be provided in the Finance Bill 2010.

Car scrappage scheme

This will apply from 01/01/10 to 31/12/10. Amount will be €1,500 and the car must be 10 years old.

Credit Review System on Business Lending

Small and Medium Enterprises , farm enterprises and sole traders are being given the right of appeal where an application for credit is refused by a participating bank after the bank’s own internal process has been finalised.

Where it is recommended that credit should be given the institution must comply or provide a written explanation. Where a decision is not given within a reasonable period of 15 days, or where the conditions attached to a credit facility are excessively onerous, this will be regarded as constructive refusal and creates a right to appeal.

Excises

Alcohol- Data shows that 44% of cross border shoppers buy alcohol. Excise duty on beer and cider is being reduced by 12cent per pint, half glass of spirits by 14cent and wine by 60 cent per 75cl bottle.

Value Added Tax

Reduction in the standard rate from 21.5% to 21% with effect from 01/01/2010.

Health

The monthly threshold for the Drugs Payment scheme is being increased from €100 to €120. A prescription charge of 50cent per item (max €10pm per family) under the GMS per month will be introduced.

Carbon Tax

A new tax was introduce our greenhouse emissions. Main details are:

• A tax of 4.2cents on a litre of petrol and 4.9cents on a litre of diesel from midnight 09 Dec.
• Increases to home heating oils and gas will apply from next May.

Mortgage Interest Relief

As a support to homeowners who now find themselves in negative equity the Minister is providing that where entitlement to relief would expire in 2010 or after, they will now continue to receive it up to the end of 2017.

To encourage those who want to buy a house over the next three years qualifying loans taken out before 01/07/11 will continue to get relief at current levels for seven years.

Irish nationals and domiciled individuals

Measures will be introduced which will impose on all Irish nationals and domiciled individuals, whose world wide income exceeds €1million and whose Irish -located capital is greater than €5million, a requirement to pay an Irish domicile levy of €200,000 per annum regardless of where they are tax resident.

High Earners

The Government wants high earners availing of tax incentive schemes to contribute more in the current difficult circumstances. Accordingly for the tax year 2010, the effective rate of income tax for those benefiting from reliefs will increase from 20% to 30% on top of which they will also pay PRSI and Levies. The entry point of the restriction will occur at adjusted income levels of €125,000 with the full restriction applying at €400,000. The Minister will examine the curtailment and removal of further reliefs in the forthcoming Finance Bill.

Fuller details can be found at www.budget.gov.ie