The changes announced in Budget 2016 this week by Finance Minister Michael Noonan, are summarised below as a quick overview. As with previous years, we have focused solely on the changes that matter to us all in Payroll- we hope you find it useful.
Universal Social Charge
Annual income for USC purposes of €13k or less will be now exempt from USC. The 1.5% and 3.5% rates have been reduced by 0.5% to 1% and 3%. Also, the 7% rate of USC has been reduced by to 5.5%., there has been no change to the 8% USC rate.
From 2016, USC will apply at the following rates for those earning over €13k per annum.
1% – Up to €12,012
3% – Next €6,656
5% – Next €51,376
8% – Balance
Medical Card recipients & individuals aged 70+ years whose income does not exceed €60k will pay a maximum rate of 3%. The rate of 8% USC will continue under the Emergency Tax Basis.
National Minimum Wage
The National Minimum Wage will rise from €8.65 per working hour to €9.15 per hour, also;
Employees under age 18 are entitled to €6.41 per hour.
Employees in the 1st year of employment, over the age of 18 are entitled to €7.32 per hour.
Employees in the 2nd year of employment, over the age of 18 are allowed to €8.24 per hour.
The minimum wage for trainees aged over 18, in structured training during working hours: 1st one-third, of course, €6.86, 2nd third, of course, €7.32 and 3rd part of course €8.24.
Statutory Paternity Leave
Statutory Paternity leave for fathers of 2 weeks with benefit will be introduced from September 2016.
A tapered PRSI credit of up to €12 per week (€624 per year) will be introduced on 1st January 2016. Employees earning between €352.01 – €424 in a week and who pay Class ‘A’ PRSI, will be eligible for a new weekly PRSI Credit. This PRSI credit will commence in respect of weekly income of €352.01 and will taper out as weekly income reaches €424. There is no PRSI Credit once your earnings exceed €424. This will reduce the amount of PRSI deducted from their wages in that week. (A similar PRSI Credit will apply to Class E and Class H employees with weekly income between €352.01 – €422 or €424 respectively)
There will be no changes for:
Employees earning over €424 in a week & paying PRSI under Class A.
Employees paying PRSI under Classes B, C, D, or J.
Calculation of Class A PRSI Credit
Class A employee PRSI will continue to be calculated at 4% of gross weekly earnings. For gross earnings between €352.01 and €424 in a week, the 4% PRSI charge will be reduced by the new PRSI Credit. The amount of the PRSI Credit depends on your gross weekly earnings.
At gross weekly earnings of €352.01, the maximum PRSI Credit of €12.00 per week applies. For earnings between €352.01 and €424 that credit is reduced by one-sixth of earnings in excess of €352.01.
Employers of Class A employees earning between €356.01 and €376.00 in a week will pay employer PRSI at the rate of 8.5%, from 1 Jan 2016. This will apply to weekly income from €38 to €376. There will be no changes for employers of Class A employees earning over €376 in a week, or for employers of workers paying PRSI under other PRSI classes.
There will be no changes for contributors paying PRSI Class S or for contributors paying PRSI under other PRSI classes (i.e. Classes K or M).
Personal Tax Credits
The following changes to tax credits will apply following Budget 2016.
Earned Income Tax Credit
An Earned Income Tax Credit of up to €550 will be introduced for those with income who do not qualify for the PAYE Tax credit- the credit will primarily apply to the professional income of self-employed people. Where a person qualifies for the Earned Income Tax Credit & PAYE Tax Credit, the combined tax credits cannot exceed €1,650.
Home Carer Tax Credit
The Home Carer Tax Credit will be increased to €1,000. In addition, the income threshold will be increased to €7,200. Where the carer’s income exceeds €7,200, the tax credit will be reduced by 50% of the excess income. This means the tax credit will be lost if the carer’s income exceeds €9,200.
Emergency Basis of Tax
There are no changes to the SRCOP & Tax Credits which apply under the Emergency Basis of Tax.
Pension Fund Levy
A stamp duty levy of 0.6% was introduced in 2011 and increased to 0.75% for 2014 on the market value of assets under management in approved pension funds & plans. In 2014 this levy was reduced to 0.15%, in 2015 the levy will cease in from December and will not apply from 2016 onwards.