Budget 2022 and You

The recently announced 2022 Budget, following the release of a better-than-expected economic forecast, was met with the usual media fanfare and analyst coverage that we have come to expect of the Minister of Finances coup de maître moment. It was a generous budget when viewed in the backdrop of the pandemic and government borrowing and sought to be fare to all, something which was largely achieved when taken in balance. Issues of climate and the environment played a big roll, a focused commitment on employment and Taxation bands for middle and low income earners received a welcome boost. The Finance Bill subsequently issued on 21^st October also managed to provide some surprises for pension holders. A summary of the main issues are:

Personal Changes

• Income tax standard rate band to be increased by €1,500 for all taxpayers.
• Personal Tax Credit to be increased from €1,650 to €1,700.
• Employee Tax Credit to be increased from €1,650 to €1,700.
• Earned Income Credit to be increased from €1,650 to €1,700.
• 2% USC rate band to be increased from €20,687 to €21,295.
• Weekly threshold for higher rate of employer’s PRSI to be increased from €398 to €410.
• New remote working tax relief amounting to 30% of the cost of vouched expenses for heat, electricity, and broadband.

Public Changes

Housing

• €6 billion will be allocated to Housing.
• €174 million for 4,000 affordable homes, including cost rental and affordable purchase.
• Help-to-buy scheme to be extended for 2022 but a review will be carried out over the year.
• €194 million for homeless services.
• A zoned land tax will be introduced to encourage building of homes.

Policing

• Additional 800 gardaí will be recruited next year.
• Some 400 Garda civilian staff will be recruited.
• €2 million for a new community safety innovation fund.

Business Supports

• Employment Wage Subsidy Scheme (EWSS) extended until April 30^th.
• Employment Investment Incentive Scheme (EIIS) extended for 3 years.
• New tax credit for digital gaming sector.
• Bank levy extended for another year.

Climate

• €200 million for retrofitting in excess of 20,000 homes.
• Carbon tax to rise by €7.50 per tonne.
• VRT exemption for electric cars to be extended until end of 2023.

Pension changes

Although technically a personal change, as these changes impact upon many of our present and future clients it merits a separate segment of its own. The AMRF (Approved Minimum Retirement Fund) requirement will now cease as it has been deemed not fit for purpose any longer. This will mean that any new retirement policies issued after the passing of the Finance Bill in December will no longer be required to meet the guaranteed income in retirement rule and will instead, if that option is chosen, be fully invested into an ARF (Approved Retirement Fund) only. In the case of existing AMRF policies, these will automatically become ARF policies from 1^st January 2022.

Existing AMRF policies, due to this change, are not subject to imputed distributions in 2021 and instead all retirement income will be subject to the distribution clause from age 61 onwards. Furthermore, the Finance Act (when enacted) will allow any amount exceeding the four times salary tax free death in service lump sum to be applied towards an ARF. This will provide surviving spouses with additional options on the death of those insured.

There has also been a change to the PRSA transfer holding term requirement for occupational pension schemes. Previously, if you were a member of an occupational pension scheme for a period exceeding 15 years, you were unable to transfer your pension benefits to a PRSA. This time limit is now also removed.

In terms of individual Income tax impact, this can be calculated by using the Irish Times link as follows https://www.irishtimes.com/business/budget/calculator

A more detailed breakdown of Budget 2022 can also be found at the government website https://www.gov.ie/en/campaigns/0020e-budget-2021/

Budget 2022 and You

The annual budget impacts each individual differently, for some it may not go far enough, the €3 increase per week in the Living alone allowance being an example. For others it may bring dread, with the reinstalment of the full VAT rate on the hospitality sector being restored, or it may be joyful, like the continuation of the Help to Buy scheme for those seeking to get onto the property ladder. In all instances however this is a snapshot of a moment in our lifetimes. The bigger picture is the totality of our lifetimes and the planning needed for decades and not singular years only. This is where the National Budget comes up short and where the Aspire Life Plan can take over as our approach considers not only the span of your own life but also that of your other family members.

Call Aspire Wealth Management on 01- 8455827 today or schedule a call back or Zoom meeting s through our website www.aspire-wealth.com to review your budget and see if you have accounted for the present and future needs of both you and your family.