The main aim of Budget 2023 according to the government was to put money back in individual and business pockets to help combat the recent cost of living increases.
Main points of Budget 2023
Here, we take a look at how Budget 2023 affects small businesses and the self-employed:
- Personal Tax Credit has increased to €1,775.
- The Employee Tax Credit has increased to €1,775.
- Earned Income Tax Credit will also increase to €1,775.
- Single persons standard tax band has increased to €40,000.
- Married person’s standard rate band increases up to €49,000 (with a further increase of up to €31,000).
- A Temporary Business Energy Support Scheme was announced.
- Introduction of three €200 Energy Credits for consumers.
- Employers’ small gift exemption increasing immediately from €500 to €1,000.
- VAT for the hospitality and tourism sector to return to 13.5% on 01 March 2023.
- Expense allowance for landlords’ pre-letting expenses has doubled to €10,000.
- Introduction of Rent Tax Credit of €500 for tenants.
Income Tax Bands
The widening of the income tax bands will take more people out of the higher rate of tax meaning you will now not pay the higher 40% rate of tax until you earn over €40,000. This will have a positive impact on take-home pay from January 2023.
The married one income band has increased to €49,000 while the married two income band has increased by up to €80,000. The Personal Tax Credit has increased to €1,775. The Employee Tax Credit has increased to €1,775. The Earned Income Tax Credit has increased to €1,775. The Home Carer’s Credit has increased to €1,700.
There were some operational tweaks to the Universal Social Charge (USC) as well, designed to benefit lower-paid workers. There has been a small update to the 2% rate of Universal Social Charge to take into account the minimum wage increase. The 2% band applies to incomes from €12,012 to €22,920.
Temporary Energy Support Scheme for Businesses
The budget announced the setting up of a State Aid Scheme known as the Temporary Business Energy Support Scheme for tax-compliant traders, to alleviate the burden of increased gas and electricity costs on businesses.
Where your average per unit price of energy is more than 50% higher in 2022 (when compared to the corresponding period in 2021), you can register for the scheme on a self-assessment basis. The scheme will cover 40% of the increased bill, subject to a maximum of €10,000 per month. We will issue more information on this important scheme as soon as we have it.
Energy Credit for consumers
The introduction of a direct electricity/energy credit to alleviate the burden of volatile energy prices. The scheme will grant three €200 credits towards energy bills in December, January & February.
VAT for Hospitality Sector
The reduced VAT rate of 9% for businesses in the hospitality industry is finished. From 01 March 2023, the VAT rate will be 13.5%. Businesses may need to recode their Point of Sale (EPOS) systems accordingly
Rental Property Tenants
Tenants can claim a €500 Rent Tax Credit. If you are renting and want to make sure you avail of this relief make sure you are claiming this credit via Revenue’s website.
Allowable pre-letting expenditure has been doubled from €5,000 to €10,000 if the property has been vacant for a continuous period of 6 months before the date of first letting.
Vacant Home Tax
A vacant home tax has been introduced, and the rate applied will be 3 times the Local Property Tax (LPT) for that property. The tax will apply to residential properties which are occupied for less than thirty days in twelve months.
Small Benefit Exemption
There has been an increase in the small benefit exemption cap. Employers can now give €1,000 (up from currently €500) a year tax-free to their employees if they so wish. They may give this sum in up to 2 vouchers per annum.
State Pension Age
The state pension age will remain at 66.
Key Employee Engagement Programme
The government announced some operational changes and the extension of the Key Employee Engagement Programme (KEEP). This scheme was introduced to incentivise and retain key employees.
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