Navigating the Tax Landscape: Key Changes in Irish Taxation Law for 2024

As we step into the realm of 2024, Irish taxpayers find themselves subject to a series of changes in taxation law. The government's recent budget outlines alterations to income tax, universal social charge, tax credits, and relief for landlords. Let's delve into the details and understand what these changes mean for you.

Income Tax Adjustments

While income tax rates remain steady at 20% and 40%, there are noteworthy changes to tax credits and income tax bands. The standard rate tax band sees a €2,000 increase to €42,000 for single individuals, with proportionate adjustments for married couples and civil partners. Tax credits, including Personal Tax Credit, Employee Tax Credit, and Earned Income Tax Credit, all receive a €100 boost to €1,875. The Home Carer Tax Credit and Single Person Child Carer Credit also see increases by €100 each.

Universal Social Charge Modifications

Effective January 1, 2024, changes to the Universal Social Charge (USC) come into play. The ceiling for the 2% USC band rises to €25,760, and the 4.5% rate narrows to 4%, applicable to income between €25,760 and €70,044. Notably, the reduced USC rate for medical card holders is extended until December 31, 2025.

Tax Relief for Landlords

A temporary rental income tax relief is introduced to support private landlords. Running from 2024 to 2027, landlords can benefit from a standard rate relief of 20% annually on rental income. The relief varies: €3,000 in 2024, €4,000 in 2025, and €5,000 in both 2026 and 2027. To avail this relief, landlords must keep their rental property in the market for the next four years. However, any departure from the rental market during this period will result in the clawback of the relief.

Income Tax Rate Thresholds

In a bid to benefit middle-income earners, the point at which the higher rate of income tax applies has increased by €2,000 to €42,000. While this move aims to provide annual savings of €400 for individuals earning over €42,000 and €800 for married couples/civil partners, it underscores the relatively low threshold for higher-rate taxation in Ireland compared to international standards.

Tax Credits Boost

Several tax credits experience an increase: the personal tax credit, employee tax credit, and earned income credit rise by €100 each to €1,875. Additionally, the home carer tax credit and single person child carer tax credit each receive a €100 increase, bringing them to €1,800 and €1,750, respectively.

PRSI Increment

A modest increase of 0.1% to all PRSI contribution rates is planned from October 1, 2024. This incremental rise is part of a phased approach to address the demands of funding the pension system.

Other Cost of Living Measures

Beyond taxation adjustments, several 'cost of living' measures are introduced. These include three credits of €150 each to assist with energy bills and a one-off reduction of €1,000 in the student contribution fee for undergraduate students.

Capital Acquisitions Tax and Heritage Items

Technical amendments to Capital Acquisitions Tax recognize wider familial relationships for foster children. Additionally, a tax credit for the donation of heritage items sees an increase in the total value of donated items eligible for relief, from €6 million to €8 million.

Supporting Sporting Organisations and Charities

Acknowledging the role of taxation in supporting sporting organisations and charities, the government hints at a review of how the tax system may further aid entities with capital programs for facility development.

In conclusion, the Irish tax landscape for 2024 showcases a mix of adjustments designed to benefit individual taxpayers, particularly those in the middle-income bracket. As these changes unfold, staying informed and exploring potential benefits becomes crucial for taxpayers. Here at Grow Financial Planning we are committed to keeping our clients moving forward through these changes, optimising growth through clear planning and strategy for your business.