The Budget 2022, announced on October 12, 2021, set out several measures intended to broaden businesses and other sectors post COVID-19. These include personal tax increases and increased incentives for people working from home. Besides modest changes to income tax rate bands and credits, the government also announced expenditure measures in critical sectors such as social welfare, health, housing, education, and employment. For example, the Employment Wage Subsidy Scheme (EWSS) was extended to April 30, 2022.
This article looks at Budget 2022 highlights and some of the key tax changes you should know. Let’s get right into it:
1. Personal Tax
While the Finance Bill 2021 retained the income tax rates, there are changes to income tax bands and increases to tax credits. The government announced an addition to the standard rate tax band of €1,500. This will see the income tax standard rate band for single earners increase from €35,300 to €36,800 while married couples and civil partners’ band increase from €44,300 to €45,800.
The widow or surviving civil partner (without a dependent child), employee, earned income, personal tax credits will also increase by €50.
Employees who work from home will be able to claim a 30% tax relief for vouched expenses for broadband, heat, and electricity — you can learn more about this [work from home tax deduction Ireland](link). The Universal Social Charge (USC) will remain the same, but the band will be increased to €21,295 so minimum wage workers’ salaries can stay outside the higher rates of USC.
The Help to Buy Property Scheme will also be extended to December 2022.
2. Business Tax
As mentioned, the EWSS will be extended to the end of April. The Employment Investment Incentive (IEE) scheme will also be extended and expanded. The corporate tax for most Irish companies will still be 12.5%. However, businesses with over €750 million in annual turnovers will pay 15% corporate tax. With these evolving tax thresholds and incentive changes, understanding [compliance and risk for Irish businesses](link) is more important than ever.
Businesses in the digital gaming sector will enjoy a 32% tax credit on eligible expenditures of up to €25 million per project. Additionally, accelerated capital allowances for energy-efficient equipment will be extended up to the end of 2024. The Pay Related Social Insurance (PRSI) threshold increased from €398 to €410 per week, making accurate [pay related social insurance calculations](link) essential for employers. This ensures that employers don’t reduce the working hours for full-time minimum wage employees.
Lastly, the Finance Bill 2021 plans to introduce anti-avoidance legislation for multinationals.
3. Covid-19 Recovery
To support economic recovery from Covid-19 restrictions, the government is pumping €7 billion in funding to various sectors. Nearly €3 billion will be allocated to industries with high certainty on costs while over €4 billion has been placed in a contingency fund.
The funding includes:
- €100 million for Pandemic Unemployment Payment (PUP) payments for January 2022
- €800 million for Covid-19 testing, contact tracing, vaccinations, personal protective equipment (PPE), and the HSE Winter Plan
- €200 million to support public transport
- €200 million for the live entertainment, hospitality, and tourism sectors
- €150 million for the safe running of schools, and for additional education and training places
- €600 million for the extension of the EWSS up to April 2022
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If you have any questions on Budget 2022 or taxation, our accounting services in Limerick team will be happy to share their insights with you.