Budget 2017: Summary of taxation changes

Budget 2017: Summary of taxation changes

Property: Help to Buy Scheme

A new scheme for First Time Buyers (FTB) of newly-built houses will take the form of a rebate of the previous 4 years’ income tax of up to 5% of the purchase price, up to €400,000.

Where the new home is valued between €400,000 and €600,000 the rebate will still be available but it will be capped at a maximum of €20,000.

No rebate can be claimed if the purchase price exceeds €600,000.

Conditions apply including the property must be a new build or self-build purchased/built as the FTBs' primary residence. The scheme will finish at 31.12.19

Second-hand properties will not qualify for relief.

The applicants must take out a mortgage of at least 80% of the purchase price.

Details on the mechanism to claim the rebate have not yet been made available.

Interest on rental properties: 100% relief for mortgage interest on new & existing mortgages on rental properties will be restored on a phased basis over the next 5 years. Relief will increase by 5% a year, commencing with 80% interest relief in 2017.

Rent-a-Room relief annual income limit will be €14,000 for 2017 and subsequent years.

Home Renovation Incentive is extended to 31.12.18. The rate of credit and expenditure thresholds remain unchanged.

Other Taxes: CAT thresholds The Group A tax-free threshold, applies primarily to gifts and inheritances from parents to their children, is being increased to €310,000. The Group B and C thresholds are being increased to €32,500 and €16,250 respectively.

Agriculture It will be possible to “step out” of “farm income averaging in a year where a farmer has “unexpectedly poor income” and pay income tax based on the actual profits for that year. The tax deferred (difference between the tax due under income averaging V tax paid) must be paid in subsequent years.

An increase in the flat-rate VAT addition from 5.2% to 5.4% from 1 January 2017.

Extension of the CGT farm restructuring relief to 2019.

Payments under the raised bog restoration incentive scheme will be exempt from CGT

Home Carer Credit will be €1,100 for 2017, can be claimed by a jointly-assessed couple in a marriage or civil partnership where one spouse or civil partner (the “home carer”) cares for 1 or more dependent persons (including children, the elderly, incapacitated, etc)

Earned Income Tax Credit will be €950 for 2017 and can be claimed by self-employed individuals (including proprietary directors) with earned income who are not otherwise entitled to the PAYE Tax Credit.

Deposit Interest Retention Tax (“DIRT”) is been reduced by 2%, from 41% to 39%, and promises to reduce by further 2% in each of the following three years until it reaches 33%.

Revised Entrepreneur Relief: The preferential rate of Capital Gains Tax (“CGT”) under the regime will reduce from 20% to 10% up to a lifetime limit of €1 million in chargeable gains.

The above is a general summary only of some of the changes announced in the recent budget. Further details or changes may be announced in the Finance Bill. Professional Tax advice should always be sought before proceeding with any transaction.

Liam McGrath Accountants and tax advisors, Roscrea and Portlaoise