The 2014 Budget And The Effect It Has On Most People’s Financial Planning.

On the day following the 2014 Budget the financial media will be awash with a regurgitation  of the various elements but most will hold back in giving advice or prodding its readers into thinking about what to do next. While we have set out below some of the main points that effect financial products, it is probably better to take in quickly those issues that deserve immediate consideration. This short list is not to be interpreted as a list of recommendations but more items for discussion in determining future financial planning. If you would like to discuss how these changes might effect your personal position please ring us directly at 01-8455827.

Change Effect Possible Remedial Action   For Consideration
The rate of   retention tax that applies to deposit interest, together with the rates of   exit tax that apply to life assurance policies, is being increased from 36%   and will now be 41%   irrespective of frequency.

 

Bank Deposits and Life   Assurance (non pension) Funds are less attractive for long term holdings Consider encashing life   assurance products and reinvesting in lower taxed investment holdings such as   UCITS and ETFs that attract CGT at only 33%
Deposit Interest to be   subject to PRSI It has become less   conducive to keep money on deposit Consider taking more   investment risk especially if such moneys are long term holdings.

 

Pension tax free lump sums up to €200,000 remains tax-free and amounts from €200,000   to €500,000 will be taxed at 20% (previously this amount was €575,000).

 

Results in higher tax   being paid on any pension related lump sums over €200,000 If considering   retirement in coming year, examine whether retirement before 31 December 2013   is more attractive on tax savings
Top Slicing Relief will no longer be available from 1   January 2014 in respect of all ex-gratia lump sum payments. (This was   previously reduced in Budget 2013 to €200,000).

 

This removes a potential   large tax savings available to retirees If considering   retirement in coming year, examine whether retirement before 31 December 2013   is more attractive on tax savings
Pensions   Fund Levy of 0.6% on pension fund assets is to increase to 0.75% for the year   2014. The levy will be reduced to 0.15% for 2015. An increased tax on pre   retirement pension assets If considering   retirement in coming year, examine whether retirement before 31 December 2013   is more attractive on tax savings
Pay & File and   backdating pension contributions will be brought forward in 2014 Date will possibly be 30   June or mid September. Self employed need to   accumulate cashflow quicker to pay tax bills earlier

 

Medical Insurance Tax   Relief Capped at €1,000 per   adult and €500 per child Review to see if cheaper   cover can be purchased

 

No Changes in the following:

Income Tax
Rates and Bands are unchanged

Capital Acquisitions Tax (CAT)
The CAT rate will remain at 33%. The Group Thresholds will remain unchanged. For example, Group A Threshold (gifted to or inherited by son/daughter) will remain at €225,000.

Capital Gains Tax (CGT)
The CGT rate will remain at 33%.

 

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