Budget 2009 - Income Tax Changes

In his Budget Statement on 14 October 2008, the Minister for Finance announced a number of changes to the personal tax system.

Tax Credits

The table below outlines the changes for 2009.

Tax Credit	2008	2009
Single Person	1,830	No change
Married person	3,660	No change
PAYE Credit	1,830	No change
Widowed person (without dependant children)	2,430	No change
One Parent Family Credit	1,830	No change
Incapacitated Child Credit Max	3,660	No change
Blind Tax Credit:
Single Person	1,830	No change
One Spouse Blind	1,830	No change
Both Spouses Blind	3,660	No change
Widowed Parent:
Bereaved in 2008	-
Bereaved in 2007	4,000	No change
Bereaved in 2006	3,500	No change
Bereaved in 2005	3,000	No change
Bereaved in 2004	2,500	No change
Bereaved in 2003	2,000	No change
Age Tax Credit:
Single/Widowed	325	No change
Married	650	No change
Dependent relative	80	No change
Carers credit	900	No change

The following reliefs remain unchanged:

Relief (allowed at the taxpayer's top rate of tax)	2008 € Max	2009 € Max
Employing a Carer	50,000	No change

Changes to Standard Rated Reliefs are as follows:

(Allowed at 20% rate band)

Relief	2008 € Max	2009 € Max
Rent Tax Relief:
Single - under 55	2,000	No change
Married/Widowed - under 55	4,000	No change
Single - 55 & over	4,000	No change
Married/Widowed - 55 & over	8,000	No change
Trade Union Subscriptions	350	No change

Services Charges

Relief on service charges remains unchanged. A maximum of €400 tax relief is granted (at 20% tax rate) in 2009 for service charges paid in the year 2008.

Rent-a-Room Scheme

The limit of the exemption from income tax, which applies to rent, received, where a person rents out a room or rooms in his or her principle private residence, remains unchanged at €10,000.

Tax Rates and Tax Bands

The tax rates remain unchanged at 20% (standard rate) and 41% (higher rate).

The table below sets out the tax rates and bands.

Personal Circumstances	2008 €	2009 €
Single/Widowed without dependant children	35,400 @ 20% Balance @ 41%	36,400 @ 20% Balance @ 41%
Single/Widowed qualifying for One Parent Family Tax Credit	39,400 @ 20% Balance @ 41%	40,400 @ 20% Balance @ 41%
Married Couple one spouse with Income	44,400 @ 20% Balance @ 41%	45,400 @ 20% Balance @ 41%
Married Couple both spouses with Income	44,400 @ 20% with increase of 26,400 max. Balance @ 41%	45,400 @ 20% with increase of 27,400 max. Balance @ 41%

Exemption Limits

There is no change to the exemption limits for persons aged 65 years and over:

Personal Circumstances	2008 €	2009 €
Single/Widowed 65 years of age & over	20,000	No change
Married Couple 65 years of age & over	40,000	No change

The limits for Single/Widowed persons aged under 65 and Married couples aged under 65 remain unchanged at €5,210 and €10,420 respectively.

Marginal Relief will continue to apply where income does not greatly exceed the relevant exemption limit.

The above exemption limits are increased by €575 for each of the first two dependent children and by €830 for the third and subsequent children.

Health Expenses Relief

Health expenses relief will be granted at the standard rate for expenses incurred from 1 January 2009 with the exception of nursing home expenses, which will be standard rated from 1 January 2010.

Income Levy

A new income levy is being introduced that will apply at the rate of 1% to gross income up to €100,100 per annum or €1,925 per week. A rate of 2% will apply to income in excess of that amount.

The levy is paid on gross income, before deductions for capital allowances or contributions to pensions.

The levy does not apply to social welfare payments including contributory and non-contributory social welfare pensions.

Tax Relief at Source – Mortgage Interest Relief

The current rate of mortgage interest relief is being increased from 1 January 2009 for first time buyers from 20% to 25% in years 1 and 2 and to 22.5% in years 3, 4 and 5. The relief remains unchanged at 20% for years 6 and 7.

The rate of mortgage relief for non-first time buyers is being reduced from 20% to 15% from 1 January 2009.

There is no change to the existing annual ceilings on the amount of interest that can be allowed on a mortgage:

	Single €	Married €
First-time buyers	10,000	20,000
Non first-time buyers	3,000	6,000

Specified Rates for Preferential Home Loans and Other Loans

There is no change to the existing specified rate in respect of home loans.

The specified rate in respect of loans other than home loans is being increased from 13% to 15%. This change will take effect from 1 January 2009.

Change in the basis of Benefit-in-Kind Charge for Company Cars

The Finance Bill will contain provisions to change the basis of the BIK charge on company cars to relate it to the cars’ level of CO2 emissions.

Cycle to work scheme

From 1 January 2009, the provision of bicycles and associated safety equipment by employers to employees who agree to use the bicycles to travel to work will be treated as a tax-exempt benefit-in-kind.

This tax exemption may only apply once in every 5-year period in respect of any one employee/director. There will be a limit of €1,000 on the amount of expenditure an employer can incur in respect of any one employee/director.

The scheme may also be implemented via salary sacrifice arrangements, whereby an employee agrees to forego part of her or her salary to cover the costs associated with the purchase of the bicycle and associated safety equipment. Where such salary sacrifice arrangements are implemented they must be completed over a maximum period of 12 months.