The Government announced the details of its €11bn Budget at the end of September and here are some of the key watch-outs for Employers:
Changes to Income Tax
Incomes above €40,000 will be subject to the top rate of tax of 40% effective from January 2023. The personal tax credit will rise from €1,700 to €1,775, while the employee tax credit and the earned income tax credit will both increase by the same amount. It is estimated that the changes will save single people around €800 a year and couples €1,600.
The second USC band is set to be increased from €20,687 to €22,920 due to the increase in the Minimum Wage. The increase in the Minimum Wage to €11.30 from 1st January 2023 has already been announced.
Small Benefit Exemption
Up to now employers could only give an employee one non-cash incentive of up to €500 per annum without giving rise to a charge to tax where certain conditions are met. This is commonly referred to as the “small benefit exemption”. This has now increased from €500 to €1,000. The incentive is often given as a Christmas voucher. Under a financial resolution, this amendment will come into force with effect from 28 September 2022, so the enhanced benefits are accessible in the current tax year.
Business Energy Support Scheme (BESS)
It was announced that €1.4bn is being allocated to the new Business Energy Support Scheme (BESS). Under the scheme, small to medium businesses will be able to avail of grants of 40% of the increases in energy bills covered, up to €10,000 per month per premises, to help with their energy costs.
KEEP – Key Employee Engagement Programme
Introduced in 2018, the Key Employee Engagement Programme (KEEP) is a tax relief for share option schemes for employees and directors of certain qualifying SME companies. It was announced that it is being extended until 31st December 2025 with some changes.
It is now permitted to buy-back KEEP shares from the relevant employee by the company to qualify for the relief. The lifetime company limit for KEEP shares is being raised from €3 million to €6 million.
Also, some Finance Act 2019 provisions with regard to group structures and qualifying individuals are being brought into effect that allow companies who operate through typical group structures to qualify for KEEP and amend the “qualifying individual” definition to also include certain part-time and flexible working employees.
VAT for Hospitality Sector
Minister Donohoe confirmed that a special VAT rate for hospitality of 9 per cent will expire at the end of February 2023.
Foreign Earnings
It was also announced that the existing Foreign Earnings Deduction relief is to be extended until 2025, which provides relief from income tax for Irish Employees who spend time working in certain qualifying counties.