Anticipating Ireland's Budget 2024: tax measures, housing and economic implications

Leading economic analyst and commentator Jim Power was guest speaker at our Budget 2024 webcast. He was joined on the panel by corporate finance partner Aiden Murphy, tax partner Lisa Kinsella, tax director Michael O'Scathaill and audit director Aidan Ryan. The webcast was moderated by audit partner Brian Geraghty. Watch the recording here.

The likely impact of this week's Budget on the wider economy will be closely watched and debated but, otherwise, much of the focus is likely to be on the tax measures introduced.

Income tax package

While no changes are anticipated to the headline rates of income tax, there is some expectation that the standard rate band and tax credits will be increased. In particular, an increase to the standard rate band would be welcomed as the top rate of tax applies at a relatively low level by international standards.

We may also see some changes to the Universal Social Charge (USC) in the form of an increase in the level at which the higher rates apply. A reduction in rates, in particular the 4.5% rate, is also being mooted in some quarters.

Property

With housing supply and costs an ongoing challenge, there has been much speculation in recent months that the government will introduce a number of incentives and reliefs to encourage supply and assist renters and homeowners.

Last year's Budget saw the introduction of a rent tax credit of €500 and there is some expectation that this may be increased.

Also eagerly watched will be whether the government introduces any tax measures to encourage landlords to remain in the market, and what form this may take. This is a very complex area, and any measures will be challenging to structure, but much of the speculation has focused on a possible reduction in the landlord's tax charge on rental income in return for greater security of tenure for tenants.

In the same vein, the government may introduce a form of Mortgage Interest Relief (MIR) targeted at homeowners who are most impacted by recent interest rate hikes.

Cost of living supports

In addition to housing costs, the cost of living more generally continues to be a challenge. In common with last year's Budget, there is some expectation that this Budget will include a number of energy credits, albeit perhaps on a smaller scale than last year.

Entrepreneurship

SMEs are currently facing a range of challenges with increased wage costs, pension auto-enrolment on the way, and the likelihood of increases to employers' PRSI (if not in this Budget, then in the coming years).

Raising finance is also a challenge for early stage and expanding businesses. The government's flagship scheme in this area, EIIS, has been the subject of several relaunches in recent years, but some SMEs find the conditions to be overly restrictive and consequently the scheme does not meet their needs. The government's room for manoeuvre is limited, however, as any further changes or enhancements to the scheme would require EU approval.

A potentially significant move in this area however would be if the government acted on the recommendation of the Commission for Tax & Welfare to extend revised entrepreneur relief to angel investors. Revised entrepreneur relief provides a reduced CGT rate of 10% on the first €1m of gains realised on the sale of businesses by owner-managers (subject to certain conditions) but is not currently available to "passive" investors. Any extension to angel investors could encourage high net worth individuals to back start-up and growing companies, thereby providing a welcome funding boost for such companies; furthermore, angel investors typically also bring a level of expertise to the business in which they invest, making them a more attractive source of finance for some entrepreneurs.

As ever, the devil will be in the detail and the small print of the Budget statement and subsequent Finance Act will be perused carefully in the coming weeks.