ANOTHER NEWSLETTER, ANOTHER BUDGET…

The Supplementary Budget announced by the Minister for Finance, Brian Lenihan on 7 April has been much debated and scrutinised over the airwaves and in our newspapers. However we thought it would be useful to point out some of the main changes and how they might affect you, your home or your business.

€ Income Levy

The income levy rates will be doubled from 1 May 2009. The new rates are 2% on the first €75,036 earned, 4% on the next €99,994 and 6% on the remainder. Those earning less than €15,028 are exempt from any income levy.

€ Health Levy & Employee PRSI

From 1 May 2009 the health levies will increase from 2% and 2.5% to 4% and 5% respectively. The entry point for the higher rate will be reduced to €75,036.

While the rate of employees’ PRSI remains at 4%, the employees’ PRSI ceiling will increase from €52,000 to €75,036 from 1 May 2009.

€ Mortgage Interest Relief

From 1 May 2009 mortgage interest relief will be abolished for any mortgages over 7 years old. In addition, the Minister signalled his intention to phase out mortgage interest relief altogether and further developments can be expected in the next budget in December.

The Minister also announced a restriction on the tax relief available for interest paid on borrowings used to purchase or improve rented residential property. The relief available will now be restricted to 75% of the interest paid.

€ Capital Gains Tax

The rate of CGT increased from 22% to 25% in respect of all disposals made after 7 April 2009.

€ Capital Acquisitions Tax

The rate of CAT increased from 22% to 25% in respect of all gifts or inheritances taken after 7 April 2009. In addition the Minister announced a 20% reduction in the tax-free group thresholds for all gifts or inheritances taken after 7 April 2009. The new group thresholds are set out below.

Group

Relationship to Disponer

Gifts & Inheritances taken between 1 January & 7 April 2009

Gifts & Inheritances taken after 7 April 2009

A

Child/step child/foster child/minor child of a predeceased child/parent

€542,544

€434,000

B

Brother/sister/grandchild/niece/nephew

€54,254

€43,400

C

Any relationship other that those set out in Groups A & B

€27,127

€21,700

€ Stamp Duty

No changes were introduced to the rates of stamp duty applicable to property transactions however a new stamp duty “trade-in” scheme was introduced whereby no stamp duty will be payable by a person who accepts a traded-in property in exchange or part exchange for a new house or apartment. Stamp Duty will apply when the person subsequently sells on the ‘swapped’ or traded-in house. Further details will appear in the forthcoming Finance Bill. This relief will not be available for commercial properties.

For further information, please contact Marie O’Riordan, Solicitor moriordan@hayes-solicitors.ie