John M Shanahan & Co.

linking practice to business

Chartered Accountants
Registered Auditors

Phone: 057 93 22100

email: info@shanahan.ie

Income Tax

Income Tax will apply in cases where you set up your business as a sole trader or in partnership with one or more other people: i.e. not through a company. If this is the route you decide to take, you will then be self-employed for tax purposes and will need to file an Income Tax return for each year that you are in business, including the year you start your business and the year you cease to be in business.

 

 

 

Income tax is charged on income arising in a tax year. The tax year coincides with the calendar year, for example, the tax year 2016 runs from 1 January 2016 to 31 December 2016.

  2017 2016 2015
Personal Tax Credits
Single 1,650  1,650  1,650 
Married/Civil Partnership 3,300  3,300  3,300 
Employee PAYE Credit (Note-1) 1,650  1,650  1,650 
Widowed Person or Surviving Civil Ptnr (no children) 2,190  2,190  2,190 
Additional tax Credits in years following bereavement:      
Year-1 3,600  3,600  3,600 
Year-2 3,150  3,150  3,150 
Year-3 2,700  2,700  2,700 
Year-4 2,250  2,250  2,250 
Year-5 1,800  1,800  1,800 
Home Carers Credit 1,100 1,000   810 
Incapacitated Child Credit (Max) 3,300   3,300   3,300 
Dependent Relative 70  70  70 
Age Credit - Single 245  245  245 
Age Credit - Married or Civil Ptnr 490  490  490 
Blind Person 1,650  1,650  1,650 
       

 

Exemption Limits 2017 2016
 
Single, Widowed or a Surviving Civil Partner 65 years of age or over 18,000 18,000
Married or in a Civil Partnership 65 years of age or over 36,000 36,000
     
Single, Widowed or a Surviving Civil Partner without qualifying children €33,800 @ 20%, Balance @ 40% €33,800 @ 20%, Balance @ 40%
Single, Widowed or a Surviving Civil Partner qualifying for Single Person Child Carer Credit.

€37,800 @ 20%, Balance @ 40%

€37,800 @ 20%, Balance @ 40%

Married or in a Civil Partnership - one Spouse or Civil Partner with income €42,800 @ 20%, Balance @ 40% €42,800 @ 20%, Balance @ 40%
Married or in a Civil Partnership - both Spouses or Civil Partners with income €42,800 @ 20% (with an increase of €24,800 max), Balance @ 40% €42,800 @ 20% (with an increase of €24,800 max), Balance @ 40%
     

 

Deposit Interest Retention tax (DIRT)

Deposit Interest Retention Tax (D.I.R.T.), The rate of retention tax that applies to deposit interest is being reduced by 2 percentage points each year over the next four years to bring the rate of DIRT from 41% to 33% over that period. This tax is being deducted at source by deposit takers (e.g. banks, building societies, Credit Unions, Post Office Savings Bank, etc.) from interest paid or credited on deposits of Irish residents.

DIRT does not apply to:

  • Interest on deposits beneficially owned by non-residents,
  • Deposits of Companies within the charge to Corporation Tax,
  • Deposits of Revenue approved Pension Schemes, and
  • Deposits of persons who are entitled to charitable exemption from tax.

First time buyers DIRT relief

Relief from DIRT on savings used by first time buyers toward the deposit on a home was introduced from 15th October 2014.

A first-time buyer of a house or apartment who purchases or self-builds a property between 14 October 2014 and 31 December 2017 may be entitled to claim a refund of DIRT.

Health/Medical Expenses Relief

A claim for tax relief may be made on a Form MED 1, at the standard rate of tax (20%), (with the exception of nursing home expenses for which tax relief is still available at your highest rate of tax) for certain medical expenses incurred by you, on your own behalf or on behalf of another person. Most medical expenses, with some exceptions e.g. routine dental and ophthalmic care, qualify for relief.

A claim for tax relief cannot be made for any expenditure which has been or will be reimbursed, e.g. by VHI, Laya Healthcare, Aviva Health, etc., or where a compensation payment is or will be made.

Home Carers Tax Credit

A Full tax credit due if the Home Carer's income is less than €7,200. If income is between €7,200 - €9,400 in 2017 (€7,200 - €9,200 in 2016), reduced relief granted.tax credit at the standard rate of tax (20%) is available for Married Couples or Civil Partners where:

  • One Spouse or Civil Partner (the 'home carer') works in the home caring for one or more dependent persons, i.e. a child for whom they are entitled to child benefit from the DSP, a person aged 65 or over, or a person who is permanently incapacitated by reason of mental or physical infirmity and the qualifying person normally resides with the couple for the year.
  • The home carer's own income is under €7,200. A reduced tax credit applies if the carer's income is between €7,200 and €9,400

Where this tax credit is claimed the couple are not entitled to the increased standard rate band normally given to couples in a marriage or civil partnership where both spouses or civil partners are in receipt of income. If only one spouse or civil partner has income or the increased standard rate band is sufficient to cover the combined income of both spouses or civil partners then this issue doesn't arise. However if this is not the case then Revenue will award whichever is the more beneficial treatment.

Home Renovation Incentive (HRI)

The Home Renovation Incentive provides a tax credit for homeowners (owner-occupiers and Landlords) for qualifying expenditure incurred on repair, renovation or improvement work carried out on a property. The HRI is paid in the form of a tax credit at 13.5% of qualifying expenditure, which can be set against your income tax over 2 years. This effectively reduces the rate of VAT to zero on qualifying work, up to a value of €30,000.

In order to qualify for the HRI, the work must be done between 25 October 2013 and 31 December 2018 for homeowners and between 15 October 2014 and 31 December 2018 for landlords. (Budget 2017 extended this closing date from 31 December 2016.)

The minimum expenditure qualifying is €5,000 and up to a maximum of €30,000.

Qualifying conditions:

  • The work must carried out on or after 25 October 2013 and on or before 31 December 2016.
  • Payments for qualifying work which are made between 25 October 2013 and 31 December 2013 will be treated as if they were made in 2014.
  • The qualifying work must be carried out by the Landlord on or after 15th October 2014 and before 31st December 2016
  • Payments made by Landlords for work between 14th October 2014 and 31 December 2014 will be treated as if paid in 2015 for tax relief.
  • If planning permission is required and is in place by 31 December 2015, then payments made in respect of qualifying work carried out between 1 January 2016 and 31 March 2016 will qualify under the incentive.
  • There is no upper limit on the cost of the works but the maximum amount on which relief can be claimed is €30,000 (before VAT).
  • The tax credit will be 13.5% of the cost of the works (before VAT), subject to the minimum and maximum amounts. It will be included on your Tax Credit Certificate or Income Tax Notice of Assessment and will be given over a 2 year period following the year in which payment is made for the qualifying work.
  • Homeowners must be LPT and Household charge compliant in order to qualify while building contractors must be VAT registered and tax compliant in order to carry out works.
  • Landlord must have registered the tenancy with the PRTB

For further information follow the Revenue link.

Medical Insurance Premium

Medical Insurance policies entered into on or after 1 May 2015
For policies renewed or entered into on or after 1 May 2015, the full adult maximum amount of €1,000, or the relevant premium where this is lower, applies for all individuals aged 21 and over, regardless of whether they are availing of a child premium.

Tax relief is granted at 20% on the amount eligible for tax relief.

Employees whose medical insurance premiums are paid on their behalf by their employer, as a Benefit-in-Kind, will not have been allowed tax relief at source. To claim the relief due it will be necessary to notify your Revenue office with the relevant details or by completing an annual tax return.

Tax relief for medical insurance premiums paid to authorised insurers is granted at source. Subscribers pay a reduced premium to the Insurer. This is the same as giving tax relief at the standard rate of 20% and is claimed as Tax Relief at Source.

Rent a room Relief

Where an individual lets a room (or rooms) in his or her sole or main residence as residential accommodation, the income may be exempt from income tax where the aggregate of the gross rents and any sums for meals or other services supplied in connection with the letting is below a certain threshold.

In Budget 2017, the ceiling for exemption from income tax under the Rent-a-Room scheme was increased from €12,000 to €14,000 for 2017 and subsequent years.

The exemption does not affect any entitlement to mortgage interest relief or to Capital Gains Tax exemption on the disposal of the residence.

Rent Relief for Private rented Accommodation

Relief is due at the standard rate of tax (20%) in the tax years 2016 and 2017 subject to the following upper limits:

Personal Circumstances                    2017       2016
Single under 55 (max.)                                                                        200  4010
Single over 55 (max.) 800 400
Widowed, a Surviving Civil Partner, Married or in a Civil Partnership under 55 (max.) 800 400
Widowed, a Surviving Civil Partner, Married or in a Civil Partnership over 55 (max.) 1,600 800

Note: Rent Relief only applies to individuals who were renting a property on 7 December 2010. No credit is due to individuals who began renting after 7 December 2010.  The amount of rent that can be relieved is reduced on a gradual basis, culminating in the total withdrawal of the relief for the year 2018 and subsequent years.

 

Revenue Approved Permanent Health Benefit Schemes

Where an employer deducts the contributions from gross pay the tax relief is given at source. Therefore no further action is necessary to claim relief.

Where an employer does not deduct the contributions from gross pay relief can be claimed, by notifying your Revenue office of the relevant details or by completing an annual tax return.

 

Revenue Job Assist/ Job Plus

Up to and including 2013, additional tax relief at the individual's highest rate of tax, was available for people who were unemployed for one year or more and who took up a qualifying job.

Tax relief under the scheme will continue to be available for successful claims processed for employments that commenced on or before 30 June 2013 until the end of their natural life cycle.

A new grant based incentive for employers, to employ those who have been unemployed for greater than 12 months is now available from the Department of Social Protection. This new incentive, called "Jobs-Plus", is based on direct grant payments to the employers who participate in the scheme.

From 1 July 2013 regular cash payments made to qualifying employers to offset the cost of employing individuals who have been long term unemployed will be exempt from income tax or corporation tax.
The Department of Social Protection will pay the incentive to the employer monthly in arrears over a 2 year period as follows:

  • €7,500 for each person recruited who has been unemployed for more than 12 but less than 24 months
  • €10,000 for each person recruited who has been unemployed for more than 24 months

 

Start your own Business

Individuals who have been long-term unemployed for at least 15 months prior to starting their own business as a sole trader can claim a two-year income tax exemption up to a maximum of €40,000 income per annum.

Start Your Own Business scheme runs from 25 October 2013 to 31 December 2018.

 You may qualify for this relief if:

1. you have been unemployed for twelve months or more, and

2. during that period you were in receipt of any of the following:

  • crediting contributions
  • jobseeker's allowance
  • jobseeker's benefit
  • the one-parent family payment
  • partial capacity payment.

For further information follow Revenue Link

 

Tax Relief at Source (TRS) on Secured loans

Income tax relief for home mortgage interest is granted at source by your mortgage lender on behalf of Revenue and the relief due is based on the amount of qualifying interest paid during the year subject to the overall limits.

Unsecured Home Loans

Relief for interest payments made on unsecured Home Loans taken out on or before 31 December 2012 and used for qualifying purposes, i.e. repair or improvement of your sole or main residence can be claimed from Revenue at the end of the tax year. If, however, you are paying interest on a qualifying private residence mortgage in excess of the ceiling for relief, listed below, and you are receiving Tax Relief at Source on this interest then there will be no additional relief due in respect of a qualifying unsecured home loan.

Tax Relief at Source - Mortgage Interest Relief

Interest paid on qualifying home loans taken out after 1 January 2004 and on or before 31 December 2012 will (subject to the exceptions below) qualify for tax relief up to the end of 2017 at the following general rates and thresholds -

First time buyers

The tax relief on interest paid on qualifying home loans is 25% for years 1 and 2; 22.5% for years 3, 4 & 5 and 20% for years 6 and 7. The upper thresholds in respect of the amount of interest paid qualifying for tax relief are €20,000 for individuals who are married, in a civil partnership, widowed or surviving civil partner and €10,000 for single individuals.  After year 7, the rates and thresholds for relief are as for non-first time buyers.

Non-first time buyers

The tax relief on interest paid on qualifying home loans is 15%. The upper thresholds in respect of the amount of interest paid qualifying for tax relief are €6,000 for individuals who are married, in a civil partnership, widowed or surviving civil partner and €3,000 for single individuals.

Exception 1 (30% rate of relief)

For individuals who purchased their first principal private residence (or second or subsequent principal private residence but only where the first principal private residence was purchased on or after 1 January 2004), on or after 1 January 2004 and on or before 31 December 2008, the rate of tax relief on the interest paid on the loan to purchase that property will, for the tax years 2012 to 2017 inclusive, be 30%, subject to appropriate first time buyers and non-first time buyers threshold.

Exception 2 (certain loans taken out in 2012 and 2013)

Mortgage interest relief is available, in certain circumstances, for the tax years 2013 to 2017, in respect of:

Interest paid on a loan taken out in 2013 to construct a home on a site, but only where such site was bought by way of a loan taken out in 2012, and

Interest paid on a loan to repair, develop or improve a home but only where loan approval was in place in 2012 and part of the loan was used in 2012 and the balance used in 2013 on such repair, development or improvement.

Loans taken out prior to 1 January 2004

Loans taken out prior to 1 January 2004 are no longer eligible for mortgage interest relief. However, top up loans/equity release loans taken out since 1 January 2004 on these pre-2004 loans may be eligible for mortgage interest relief, provided they adhere to eligibility criteria as listed above.

Note: The relief will be abolished completely by the end of 2017.

 

Top Slicing Relief

Top Slicing Relief, which was an additional relief granted in respect of the tax payable on a lump sum payment, has been abolished in respect of all ex-gratia payments (both redundancy and retirement), made on or after 1 January 2014.

 

Tuition Fees

Tax relief at the standard rate of tax (20%) is available for tuition fees which includes the Student Contribution but does not include examination fees, registration fees and administration fees. The maximum limit on such qualifying fees for the academic year 2015/2016 is €7,000, per individual per course.

 

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