Republic of Ireland: Budget 2009 - Income tax changes limited to tax band thresholds

Written by Ian Congreave - Filed under: Budgets on November 17th, 2008

There are no increases for 2009 to tax credits and other reliefs, or to the rates of income tax. The tax bands are increased as follows:

Income levy
A new income levy is being introduced that will apply at the rate of 1% to gross income up to €100,100 per annum or €1,925 per week. A rate of 2% will apply to income in excess of that amount. The levy is paid on gross income, before deductions for capital allowances or contributions to pensions.

The levy does not apply to social welfare payments including contributory and non-contributory social welfare pensions.

Change in the basis of Benefit-in-Kind Charge for company cars
The Finance Bill will contain provisions to change the basis of the BIK charge on company cars to relate it to the cars’ level of CO2 emissions.

Increase in the specified rates for preferential home loans and other loans
An employee in receipt of a preferential loan is charged income tax on the difference between the interest actually paid and the amount which would have been payable at the “specified” rates of interest for the loans. To reflect changes in interest rates, the specified rate in respect of loans (other than home loans) is being increased from 13% to 15%. These changes will take effect from 1 January 2009.

Cycle to work scheme
From 1 January 2009, the provision of bicycles and associated safety equipment by employers to employees who agree to use the bicycles to travel to work will be treated as a tax-exempt benefit-in-kind.

This tax exemption may only apply once in every 5-year period in respect of any one employee/director. There will be a limit of €1,000 on the amount of expenditure an employer can incur in respect of any one employee/director.

The scheme may also be implemented via salary sacrifice arrangements, whereby an employee agrees to forego part of her or her salary to cover the costs associated with the purchase of the bicycle and associated safety equipment. Where such salary sacrifice arrangements are implemented they must be completed over a maximum period of 12 months.

Levy on car parking facilities provided to employees by their employers
A flat rate levy of €200 per annum will be charged on employees whose employer provides them with car parking facilities. The levy will be confined to employer provided car-parking facilities situated in the main urban centres. Further details relating to this will be announced at a later date.

Pensions contribution limit
The annual earnings limit for determining maximum tax-relievable contributions for pension purposes is being set at €150,000 for 2009 compared to the 2008 limit of €275,239.

Further information:
Budget Summary

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Written by Ian Congreave -

Filed under: Budgets on November 17th, 2008