Budget 2021 EXPLAINED– everything you need to know about today’s announcement!
- Largest Budget package in history of state
- Covid-19 pandemic and potential no-deal Brexit at forefront of government's focus
- Christmas Bonus for welfare recipients to also include most Pandemic Unemployment Payment (PUP) recipients
- €4 billion in extra health spending agreed
- Some motorists to face increased bills
With the New Year on the horizon, the government today began to outline its plan to tackle the ongoing coronavirus pandemic and the potential for a 'no-deal' Brexit.
Budget 2021 – the largest budget package in Ireland's history – contains details of how the government intends to spend €17.75 billion in the coming 12 months.
The budget, which was delivered today by Minister for Finance, Paschal Donohoe and Minister for Public Expenditure and Reform, Michael McGrath, includes a number of measures to support businesses, workers, the healthcare system and more.
How does Budget 2021 affect your pocket? Try our FREE calculator to find out!
Here is your complete guide to Budget 2021.
Income tax and reliefs
The government had flagged well in advance of today's announcement that there would be no major changes to income tax.
However, Minister Donohoe did announce a number of notable tweaks.
USC
To support those on the minimum wage, the government has announced that the second USC rate band will be increased from €20,484 to €20,687.
PRSI
The weekly threshold for the higher rate of employer's PRSI will be raised from €394 to €398.
Earned Income Credit
The government has committed to increasing the Earned Income Credit for self-employed workers by €150 to €1,650.
Dependent Relative Tax Credit
The Dependent Relative Tax Credit was increased by €175 - from €70 to €245. Read more about who can claim this credit here.
Working from home
Minister Donohoe highlighted the impact that working from home has made in the response to the pandemic. He said the government is committed to developing a strategy for remote working in the future.
He also used the budget announcement to highlight the reliefs that are currently in place for remote workers:
- Where an employer makes payments towards the expenses of working from home, up to €3.20 may be paid to employees without a Benefit-In-Kind arising
- Where an employer does not make a contribution, the worker may claim a tax deduction for utility expenses such as heat, electricity and broadband
Minister Donohoe also announced that claims may be made for any other expenses incurred 'wholly and exclusively' in the performance of work from home.
Read more about claiming tax back on your remote working costs here
Digital Gaming
Work will take place in 2021 to develop a tax credit for the digital gaming sector. The credit will support qualifying activity from January 2022 onwards.
The average Irish tax refund is €1,880
Social welfare
The government announced an overall package of €510m for social welfare.
While the primary rates of social welfare will be maintained in 2021, perhaps the main talking point relates to the Christmas Bonus payments.
Ordinarily such bonuses are paid only to those who have been receiving an eligible payment for 15 months.
However, the government has announced that a one-week Christmas bonus will be given to all welfare recipients - including those in receipt of the Pandemic Unemployment Payment (provided they have been claiming it for at least four months).
The government also announced that a new variant of the Employment Wage Subsidy Scheme will be introduced after the current scheme ends next spring.
What's more, there will be increases in the Living Alone Allowance (by €5 euro to €19), Fuel Allowance (by €3.50), Qualified Child Payment (by €5 euro for children over 12, and by €2 for the under 12s) and the Carers Support Grant (boosted by €150 euros).
Finally, the State pension is to be maintained at 66.
Carbon Tax and motoring
Carbon tax will be increased by €7.50 from €26 to €33.50 per tonne/CO2.
This increase will be applied to auto fuels – from tonight - and all other fuels from 1 May 2021.
Legislation will also be introduced to increase the tax each year by €7.50 up to 2029 and by €6.50 in 2030 to achieve €100 per tonne.
What's more, a new VRT rate structure of 7% - 37% will be put in place from January 2021 for cars with lower emissions.
Brexit and Covid-19 Supports
Budget 2021 was underpinned by two key assumptions:
1) There will be no trade deal between the EU and the UK
2) Covid-19 will continue to exist next year in the absence of a vaccine
As a result, the government has said that it will be allotting an additional €3.8 billion in core current expenditure in 2021. Some €2.1 billion will be held in contingency, to be made available as needed in response to the challenges posed by the pandemic.
€340 million will be spent on Brexit supports next year.
This money will be used for work at ports and airports and provides for an additional 500 staff (bringing the total provision for approximately 1,500) for operationalising checks ahead of 1 January.
The average Irish tax refund is €1,880
Supports for Businesses
Covid-19
There will be a new scheme for businesses that have had to close due to the pandemic. A maximum of €5,000 per week will be made available through the scheme (payment will be based on 2019 average weekly turnover).
The scheme will operate when Level 3 restrictions are in place and cease when restrictions lift. Businesses must demonstrate that turnover has been severely impacted by up to 80%.
Tourism & Hospitality
In recognition of the unprecedented challenges facing the hospitality sector, Minister Donohoe announced a reduced VAT rate of 9% (from 13.5%) which will come into effect from 1 November.
The reduced rate will be in place until December 2021.
Meanwhile, Minister McGrath announced an additional €55 million for a 'tourism business support scheme and €5 million for tourism product development'.
€50 million in live event supports and an additional €50 million in funding for the Arts Council was also introduced - bringing its funding to €130 million in 2021.
SMEs
Debt warehousing provisions will be extended for 12 months with no interest charged. There will also will be a €30 million fund administered through the Ireland Strategic Investment Fund.
Housing
First time buyers can benefit from the help-to-buy scheme for an extra 12 months. The scheme, which offers the lower of 10% of the value of the property or €30,000 in relief, has been extended to the end of 2021.
In addition, the government are allocating a record €5.2 billion to the Department of Housing in 2021 - an increase of €733 million on last year.
Health
Irish health services have been boosted by an extra €4 billion.
This expenditure will provide capacity for 100,000 pandemic tests a week, supply PPE where needed and maintain into 2021, all of the necessary Covid-19 measures which have been put in place since March.
Owed medical expenses?
Capital Infrastructure
An extra €500 million will be invested (totalling in over €10 billion) for critical projects across Ireland including roads, rail, ports and airports, education and broadband.
Justice
€147 million has been allocated for the overall justice sector. This represents a 6 per cent increase on 2020. €27 million will go to pandemic related initiatives and there will be 620 new Garda recruits.
Cigarettes and Alcohol
The cost of a packet of cigarettes has been increased by €0.50 – raising to €14 in the most popular category. There has been no change in the cost of alcohol.
Use our Budget Calculator below to see how the budget will impact your take home pay.
Also, don't forget, if you need helping claiming your Irish tax rebates for the past four years, Taxback.com can help you get your tax refund in Ireland!
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