On October 13, 2020 the Irish government announced the budget for 2021 outlining all government expenditure and revenue, including all ministries, agencies, non-commercial public bodies and the local government sector. What are the consequences for businesses?
2020 has been a year of unprecedented challenges for individuals, employees, entrepreneurs and business owners who have had to deal with the coronavirus epidemic and its aftermath. However, certain elements presented in this budget will bring some relief to those affected.
Personal income tax changes in 2021
The self-employed income tax credit will increase to €1,650. The upper limit of the second USC rate bracket will drop from €20,484 to €20,687. This change will benefit people who earn minimum wage. Likewise, the tax credit relating to dependents will be reduced from €70 to €245 and will benefit people who support a parent at their own expense. State Pension will remain at age 66 while the hourly minimum wage rate will increase by 10 cents from €10.10 to €10.20.
Parental allowance will be extended from 3 to 5 weeks for parents of children born or adopted from November 1, 2019.
The fuel allowance rate increases by €43.5
The caregiver aid grant increases by €150.
Subsistence allowance increases by €5
Increase of €10 of the Working Family Payment threshold for families with up to 3 children.
The income threshold of €425 for the single-parent family payment will be abolished.
Measures to support enterprise and SMEs
VAT on tourism and hotel goods and services will be temporarily reduced from 13.5% to 9% from November 1, 2020.
Covid Restriction Support Program
Businesses that have had to close due to Covid-19 restrictions at level 3 or higher will be able to claim up to € 5,000 per week in lost revenue compensation. This will take place from October 13, 2020 to March 31, 2021. It will run from 13th October 2020 until 31 March 2021 and will be paid in addition to the Employment Wage Subsidy Scheme (EWSS).
Tax relief for capital entrepreneurs
A natural person who holds at least 5% of ordinary shares for a continuous period of three years (during the previous 5 years), is now entitled to this tax relief.
Additional tax measures
The weekly threshold for the upper rate of the employer PRSI will drop from €394 to €398. This will ensure that there is no incentive to reduce the working hours of a full-time minimum wage worker.
The storage of tax debts will be expanded to include repayments from the temporary wage subsidy scheme owed by employers and preliminary tax obligations.
Extension of the Knowledge Development Box until the end of December 2021.
Work will take place in 2021 to develop a tax credit for the digital games sector which should support all eligible activities from January 2022.
Measures for jobs
An additional 3.2 billion euros is earmarked for the pandemic unemployment payment, the employee wage subsidy scheme and to help people upgrade their skills and re-enter the labor market.
An increase of 2,000 places for skills to be completed for people who have lost their jobs as a result of Covid-19. 1,600 additional Skills to Advance places are planned for upgrading and re-qualification as well as 5,000 further development opportunities through Skillnet Ireland.
Aid has been created to encourage employers to hire around 4,000 new apprentices and ensure that 2,000 apprentices affected by Covid-19 complete their program.
The 2021 budget calendar was prepared on the assumption of a "hard" Brexit. An additional amount of 340 million euros will allow work to continue on existing projects and support. The funding will help support the sectors most exposed to Brexit. For example, Bord Bia, Local Enterprise Offices, Enterprise Ireland and IDA. This money will be provided in addition to the € 3.4 billion stimulus fund that tackles Brexit and Covid-19. Have your accountant accompany you to find out how to benefit from these measures in your business.