Ireland: Tax proposals in budget 2024

The Minister for Finance on 10 October 2023 introduced the 2024 budget that includes various measures concerning income tax, business tax, capital gains tax, and indirect taxes.

Further detailed measures will be included in the Finance Bill, which is scheduled to be published on 19 October 2023.

The following provides an overview of certain tax measures proposed in budget 2024.

• Income tax standard rate band to be increased by €2,000 to €42,000 with proportionate increases for single person child carers, married couples, and civil partners.
• The personal tax credit, employee tax credit and earned income credit to all be increased from €1,775 to €1,875.
• Increases in various tax credits including the home carer tax credit (increased from €1,700 to €1,800), single person child carer tax credit (increased from €1,650 to €1,750) and incapacitated child tax credit (increased from €3,300 to €3,500).
• Rent tax credit increased from €500 to €750 per year. The credit would also be extended to parents paying rent on behalf of student children in certain tenancies backdated to the 2022 tax year and retained for current and future years.
• Various amendments to the Universal Social Charge (USC) including an increase in the 2% USC rate band from €22,920 to €25,760, reduction in the 4.5% USC rate band to 4%, and reduced USC rates for medical card holders extended until the end of 2025.
• Various farming-related tax reliefs to be extended and/or increased including: (1) enhanced stock relief for farm partnerships, (2) stamp duty relief on transfer of farms from parents to children, (3) accelerated capital allowances for farm safety equipment, and (4) increase in combined lifetime threshold across a number of measures including stock relief for young trained farmers, relief for succession farm partnerships and young trained farmers stamp duty relief.
• Mortgage interest relief of up to €1,250 introduced for the 2023 tax year in respect of increased interest paid on a primary dwelling mortgage relative to 2022 interest paid.
• Existing rates of benefit in kind (BIK) on company cars retained and proposed tapering of preferential BIK relief deferred. 
• 0.1% increase in all rates of pay related social insurance (PRSI) from October 2024.

• Enhancements to the research and development (R&D) regime including an increase in the credit available from 25% to 30% in respect of claims that would be filed in 2025 and increase in the first-year payment threshold from €25,000 to €50,000. 
• Legislation will be published in the Finance Bill next week to implement the 15% minimum effective tax rate to in-scope taxpayers as provided for under the OECD Pillar Two agreement.
• Work is ongoing to develop a territoriality / participation exemption for foreign-sourced dividends with the intention that this will be legislated for in Finance Bill 2024 after due consideration of recent consultation processes.
• A revised bank levy will be introduced with the intention of raising €200 million in 2024.
• Maximum qualifying expenditure for film relief under Section 481 would be increased from €70 million to €125 million, subject to State aid approval.  
• Establishment of two specific funds: (1) the Future Ireland Fund, which will be designed to support future social and public expenditure, and (2) an Infrastructure, Climate and Nature Fund to support sustained levels of investments in infrastructure to support climate and nature related projects. The Future Ireland Fund would initially be funded with windfall corporate tax receipts, while both would receive seed funding further to the dissolution of the National Reserve Fund.
• Intention to establish a dedicated group focused on simplifying and modernising the administration of business supports.
• Engagement with stakeholders over the next year in relation to complexities regarding the current interest deductibility regime. In addition, there will be consideration of the current taxation framework applicable to the funds sector (including life assurance exit tax), following the recent consultation process. 

• A new targeted CGT relief for angel investors in innovative, startup small and medium-sized enterprises (SMEs) has been announced. The relief would provide for a lower CGT rate of 16% (or 18% when held through a partnership) for disposals of qualifying investments for gains up to a value of two times the initial investment. There is a minimum investment period of at least three years and lifetime relief limit of €3 million.
• The upper age limit for claiming retirement relief would be extended from 65 to 70 from 1 January 2025. Reduced relief that was previously available on disposals from 66 onwards would apply from above this increased age threshold. From 1 January 2025, a limit of €10 million on the relief available on transfer to a child is to be introduced.
• A cost-benefit analysis of revised entrepreneur relief has been carried out and it is intended that opportunities to refocus the relief will be examined to improve the incentives offered for founders and entrepreneurs.
• The employment investment incentive (EII) scheme is being enhanced by standardising the minimum holding period for all investments to four years and doubling the amount on which an investor may claim relief on from €250,000 to €500,000.  Future simplications and enhancements to the scheme are also being considered, with a review of the scheme in early 2024 being announced.

• Temporary 9% value added tax (VAT) rate currently applicable to supplies of gas and electricity extended for an additional 12 months.
• Increase in VAT registration thresholds to €40,000 and €80,000 in relation to the respective supplies of services and goods from 1 January 2024.
• 0% VAT rate to apply to the supply and installation of solar panels in schools, in addition to the supply of audio books and eBooks from 1 January 2024.
• Funds available under the existing Charity VAT Compensation Scheme to be increased from €5 million to €10 million.
• Revenue Commissioners to launch a public consultation on how digital advances can be used to modernise Ireland’s VAT invoicing and reporting system.
• Vehicle registration tax (VRT) relief for battery electric vehicles would be extended to the end of 2025.
• Excise duty on a packet of 20 cigarettes to be increased by 75 cents (including VAT) with a pro-rata increase on other tobacco products from midnight on 10 October 2023. Announcement to introduce a tax on e-cigarettes and vaping products in next year’s budget.
• Fuel excise increases that were due to come into effect on 31 October 2023 to be deferred until 2024. The rate per tonne of carbon dioxide emitted for petrol and diesel would go up from €48.50 to €56.00 from 11 October 2023 as per the trajectory set out in the Finance Act 2020.
   

Read reports prepared by the KPMG member firm in Ireland:

• Budget 2024 headlines [PDF 209 KB] (4 pages)
• Taxing times: Budget 2024 and current tax developments [PDF 54 MB] (24 pages)

Additional reports can be found on the Budget 2024 webpage prepared by the KPMG member firm in Ireland