Personal taxes budget 2023

Highlights

• Increases to income tax standard rate bands of €3,200 for all earners.
• Increase of €75 for personal, PAYE and earned income tax credits. Home Carer credit increased by €100.
• Increase of €1,625 to the 2% USC band from €21,295 to €22,920. This is in line with the increase in the hourly minimum wage rate.
• Extension of Help to Buy (HTB) scheme to 31 December 2024.
• Further one-year extension of the reduced rate of USC for medical card holders and individuals 70 years of age or over earning €60,000 or less. This caps the highest rate band for these individuals at 2%.
• Rent tax credit for private tenants of €500 per annum.
• Deductions for Eligible Pre-letting expenditure increased from €5,000 to €10,000 per property.
• A new Vacant Homes Tax (VHT) will be introduced in 2023. The VHT will be self-assessed and administered by the Revenue Commissioners. The tax will apply to residential properties which are unoccupied for twelve months or more.

A property will be considered vacant for the purposes of the tax if it is occupied for less than 30 days in a 12-month period. The tax will be charged at a rate equal to three times the property’s existing base Local Property Tax liability.

There will be a number of exemptions to ensure property owners are not unfairly charged for temporary vacancy arising from genuine reasons. This will include properties recently sold or currently listed for sale or rent; properties vacant due to the occupier’s illness or long-term care; and properties vacant as a result of significant refurbishment work.

• Extension of stock relief measures for farmers, young-trained farmers and partners in registered farm partnerships.
• Special Assignee Relief extended for a further three years until 31 December 2025. The threshold income to avail of relief has been increased to €100,000.
• Foreign Earnings Deduction (FED) relief extended to 2025.

Rates/Bands/Credits

USC Rates & Bands

• Incomes of €13,000 or less are exempt.
• Increase of €1,625 to the 2% rate band.
• For total income liable to USC greater than €13,000 the following rates of USC will apply:

1. €0 to €12,012 @ 0.5%.
2. €12,013 to €22,920 @ 2%.
3. €22,921 to €70,044 @ 4.5%.
4. €70,045 + @ 8%.

• Self-employed income in excess of €100,000 – 3% surcharge.
• The reduced rate of USC for medical card holders and individuals aged 70 or older, both who earn €60,000 or less is being extended for a further year to 31 December 2023. This caps the highest rate band for these individuals at 2%.

PRSI

No changes announced to Employee PRSI.

Help to Buy (HTB) Scheme

The HTB measures announced as part of the July 2020 Stimulus Package have been extended until 31 December 2024. The relief available continues to be the lower of:

• €30,000,
• 10% of the cost of a new home or self-build, or
• The total amount of income tax and DIRT paid in the four years before purchase or self-build.

Pre-Letting Expenditure for Landlords

The deduction of pre-letting expenses incurred by landlords was extended to 31 December 2024 to encourage the return of empty properties to the rental market. The maximum eligible expenditure qualifying for deduction has been increased from €5,000 to €10,000 per property and the vacancy period required to qualify has been halved from 12 months to 6 months.

Tenants Rent Tax Credit

A new tax credit of €500 per annum for renters in the private rented sector is being introduced for those who are not in receipt of any other State housing support. Only one credit may be claimed per person per year, however it is proposed that the value of the credit will be doubled in the case of married couples and civil partners. It is proposed that the credit may be claimed “in year” in the years 2023 to 2025 and that, in addition, it may be claimed for 2022 from early in 2023.

Vacant Homes Tax (VHT)

A Vacant Homes Tax (VHT) will be introduced in 2023. The tax will apply to residential properties which are occupied for less than thirty days in a twelve month period.

The VHT will be self-assessed and administered by the Revenue Commissioners.

The tax will apply to long-term vacant residential property and will be paid by property owners. Long-term, in this instance, refers to properties which are unoccupied for twelve months or more. A property will be considered vacant for the purposes of the tax if it is occupied for less than 30 days in a 12- month period. The VHT will operate by requiring owners of vacant residential properties to file an annual return declaring that their properties were vacant in the applicable 12-month period and indicating the LPT valuation band/valuation that applies to the property which will be used to assess their VHT liability.

The VHT will share some features with the existing Local Property Tax. The tax will apply to buildings which are residential properties for the purposes of LPT. This means that it will not apply to derelict properties or properties unsuitable for use as a dwelling which are not captured under the LPT system.

The tax will be charged at a rate equal to three times the property’s existing base Local Property Tax liability – that is, the liability before the application of the Local Adjustment Factor (LAF).

There will be a number of exemptions to ensure property owners are not unfairly charged for temporary periods of vacancy with genuine reasons. These will include:

• properties recently sold or currently listed for sale or rent;
• properties vacant due to the occupier’s illness or long-term care; and
• properties vacant as a result of significant refurbishment work.

Farming Stock Relief

The deduction from farming trading income of an accounting period of 25% of the increase in the value of trading stock in the period is being extended for a further three years until 31 December 2024.

The deduction for enhanced stock relief at a rate of 100% for young trained farmers with qualifying level of academic training and at a rate of 50% for farmers who are partners in registered farm partnerships are being extended for a further year until 31 December 2024, contingent on the update from the Agricultural Block Exemptions Regulation (ABER).

Special Assignee Relief Programme (SARP)

This relief is being extended for a further three years until 31 December 2025. The threshold income to avail of the scheme is being increased from €75,000 to €100,000. Existing claimants are not affected by the change.

Foreign Earning Deduction (FED)

This scheme is being extended for a further three years to end-2025. It provides relief from income tax on up to €35,000 of income for employees tax-resident in Ireland who travel out of the State to temporarily carry out duties of employment in certain qualifying countries.

Further details and the workings of all the above will be provided in Finance Bill.