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Budget
No.1 2009 - Oct. 2008
The 2009 Budget was introduced by Minister for Finance Brian Lenihan
on 14 October 2008. This was the most difficult Budget for
many years, given the problems of poor public finances and negative
economic growth. The fact that the Minister found it necessary to
bring forward the date of the Budget by 6 weeks tells its own story.
In this context, its not surprising that there were more
losers than winners in this Budget. Most people will be
feeling its effects in their pockets in the early months of 2009.
Income Tax Credits
The main Income Tax credits were unaffected by the Budget, and
remain at the same levels as in 2008:
Income tax credits 2009
| Tax Credits |
2009 |
| Personal Tax Credit - Single |
1,830 |
| One Parent Family |
3,520 |
| One Parent Family Credit |
1,830 |
| PAYE Credit |
1,830 |
Income Tax Rates & Bands
There were no changes either to the Income Tax rates of 20% and 41%.
The standard rate tax bands were increased for individuals by
1,000 to 36,400, for single income families by 1,000 to
45,400 and for couples by 2,000 to 72,800. The Income tax
exemption limits also remain unchanged.
Income levy
One of the more controversial aspects of the Budget was the new
income levy on income. The levy is payable on gross incomes,
before any relief for capital allowances, losses or pension
contributions.
On Budget Day, the levy was heralded as a simple and straightforward
means to allow all income earners to contribute in a
proportionate manner to the restoration of order and stability to
the public finances in the Ministers own words.
Unfortunately since its announcement, it has proved to be
quite complex and complicated, and the authorities have found it
necessary on a number of occasions to change and adapt its
provisions in order to remove anomalies.
The levy, as implemented on January 1 2009, is payable at the
following rates in 2009
 | 1% on income up to 100,100, |
| 2% on Income between 100,101 and 250,120, |
| 3% on Income in excess of 250,120. |
The levy does not apply
| to individuals whose annual income is below 18,304 in
09. |
| to over 65s whose 2009 income is below 20,000 per
individual or 40,000 per married couple |
| to holders of Full Medical cards (but not GP-only medical
cards) |
| to Social Welfare income |
Mortgage interest relief
There is improved mortgage
interest relief for first time buyers in 2009. The relief is
increased from 20% to 25% in year 1 and year 2, of the
mortgage and to 22.5% in years 3, 4 and 5. The relief will revert to
the standard rate of tax in years 6 and 7. Maximum limits apply to
each category. For non-first time buyers, the rate of mortgage
interest relief is cut from 20% to 15%.
Health Expenses relief
Tax Relief for health expenses
will be allowed only at the standard rate of tax with effect from 1
January 2009. Up to now, relief was allowed at the marginal rate of
tax. Nursing home costs will continue qualify for relief at the
marginal rate, but only until 1 January 2010.
Pensions
The annual earnings limit for
maximum tax-relief on pension contributions is cut from 275,239
to 150,000 for 2009.
Car parking levy / Cycle to
work scheme
A flat levy of 200 per annum
will be charged on employees whose employer provides them with car
parking facilities situated in the main city centres. On the other
hand bicycles and cycle safety equipment up to a value of 1,000
per employee will be exempt from benefit-in-kind where the employee
agrees to cycle to work.
Deposit interest
retention tax
DIRT tax on deposit interest,
increases from 20% to 23% in 2009. The tax rate on life assurance
policies and investment funds goes up to 26%.
Capital Gains Tax
The capital gains tax rate was
increased to 22% with effect from Budget Day. There are changes to
the payment dates for CGT. For disposals in the period January to
November each year, the payment date will now be in mid-December.
The tax on disposals in December will now be due on the following 31
October.
VAT Rate
The standard rate of VAT was
raised from 21% to 21.5%, much to the dismay of retailers and
consumers. It remains to be seen whether this increase is
sustainable in the long-term.
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