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:
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%.