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You are here:  Budget 2010 Personal Taxation |
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| Personal Taxation |
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High Earners
Finance Act 2006 introduced the High Earners Restriction whereby there was a restriction on the use of certain specified tax reliefs. The restriction applies so that the maximum amount of specified reliefs which an individual may claim in a tax year is 50% of the individual’s “adjusted income”. The individual’s “adjusted income” is calculated by taking his/her taxable income and adding back the specified reliefs which he/she claims for that year. Currently the restriction does not apply if the individual’s adjusted income is less than €250,000. Tapering relief applies for incomes between €250,000 and €500,000.
The result was that every individual pays tax at an effective rate of 20%. The Minister has significantly reduced the level at which the High Earners restriction will apply to €125,000. Tapering relief will now apply for incomes between €125,000 and €400,000. He has also indicated that the effective tax rate that will apply will be 30% plus PRSI and levies. These changes will apply for the 2010 tax year. Further details of this measure will be included in the Finance Bill. |
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Irish Domiciliaries
All Irish nationals and domiciled individuals whose worldwide income exceeds €1million and whose Irish located capital is greater than €5 million will be required to pay an Irish domicile levy of €200,000 per annum regardless of where they are tax resident. Further details of this measure will be included in the Finance Bill.
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Tax Credits / Tax Bands / Income Levy / PRSI Ceiling
There has been no change to tax credits, tax bands, the income levy or the employee PRSI ceiling. The Minister indicated that the income tax system will be reformed to take effect in 2011. The Minister expects:
- A universal social contribution will be paid by all workers at a low rate (which will replace the current PRSI/health levy/income levy), and
- Income tax that will apply on a progressive basis as earnings increase. |
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Mortgage Interest Relief
The Minister indicated that mortgage interest relief will be abolished entirely by the end of 2017. However, in the meantime, if a homeowner is currently in negative equity and their relief is due to expire in 2010, they will now continue to receive the relief up to the end of 2017. He has also indicated that where loans are taken out before 1 July 2011, the home owner will continue to receive relief at current levels for seven years. Transitional arrangements will be applied to loans taken out in the subsequent 18 months at a reduced level and duration. Further details of this measure will be included in the Finance Bill. |
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Pensions
The Minister stated that he accepted the Commission on Taxation’s recommendation that pension lump sums below €200,000 should not be taxed. The tax treatment of sums above €200,000 and a 33% rate of tax relief on pension contributions are being considered by the Government’s National Pensions Framework which will shortly be published by the Minister for Social and Family Affairs. |
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| The above is intended as a general guide to the measures announced in Budget 2010. All changes announced are subject to being enacted in the forthcoming Finance Bill. It is possible that the measures described above may be modified prior to enactment. No action should be taken on the basis of the above without obtaining professional taxation advice. |
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Purcell McQuillan Tax Partners Limited, 17 Clyde Road, Dublin 4
T: (01) 668 2700 F: (01) 668 2750 E: pmq@pmqtax.com W: www.pmqtax.com |
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