Budget 2022 - Key points

Today, 12 October 2021, Ministers Paschal Donohoe and Michael McGrath formally presented Budget 2022. The medium strategy budget includes projected spending of €87.6 billion and takes aim at funding for public services, rebuilding public financing, tackling the rising cost of living and the steady phasing out of Covid-related supports.

The lifting of Covid-19 restrictions over the course of the year has prompted the early signs of economic recovery with modified domestic demand growing by 8.5% in Q2 2021, surpassing pre-pandemic levels for the first time. Demand is expected to grow by 5.25% and 6.5% in 2021 and 2022 respectively.

Key announcements for Irish businesses:

• The Employment Wage Subsidy Scheme will be gradually phased out by 30 April 2022. The scheme will remain in its current format without change for October and November 2021. From 31 December 2021, the scheme will be closed for new applicants. In December through February a two-rate structure will be established with rates of €151.50 and €203 applied. In March and April, the final two months of the support, a flat rate of €100 will be put in place.

• The national minimum wage will be increased to €10.50 per hour. In addition to this, the ceiling of the second Universal Social Charge (USC) rate band will be increased to €21,295 to ensure that the salary of a full-time employee on the minimum wage will remain outside of the top rates of USC.

• The standard rate income tax band will increase by €1,500 and the personal tax credit, employee tax credit and earned income tax credit will increase from €1,650 to €1,700.

• Extension of the Bank Levy for another year. To date this levy has had an annual yield of approximately €150 million.

• The reduced rate of VAT for hospitality of 9% will remain in place.

• The Finance Bill will include supports for the aviation sector, in the form of amendments to Section 127B of the income tax code.

• There has been an extension of Section 486C Corporate Tax Relief for certain start-up companies from 3 years to 5 years to the end of 2026.

• There will be a new tax credit for the digital gaming sector covering expenditure incurred on the design, production and testing of a game. The credit will be available at a rate of 32% on eligible expenditure up to a limit of €25 million per project.

• To support the growth in remote working, the government has introduced an income tax deduction amounting to 30% of the cost of vouched expenses for heat, electricity and internet in respect of expenses incurred while working from home.

• Budget 2022 contained income tax measures amounting to €520 million, including an increase in the standard rate band by €1,500 and an increase of €50 to personal tax credits, employee tax credits and earned income credits.

• The Innovation Equity Fund will receive additional funding, along with a mandate to invest in domestic, high-innovation enterprises. From early 2022, the Ireland Strategic Investment Fund (ISIF) expects to invest €30 million leading to potential investments of up to €90 million for predominately seed stage Irish SMEs.

• Capital expenditure will double, with €11.1 billion made available next year for investment covered by the National Development Plan, a 14% increase on last year.

• As expected, a commitment to maintain a corporation tax rate of 12.5% for companies with group consolidated revenue below €750m was confirmed and a commitment to introduce a minimum effective tax rate of 15% on companies with consolidated group turnover of €750m was announced.

• Interest limitation rules (limiting tax deductible net borrowing costs to 30% of EBITDA) and anti-reverse hybrid rules to be introduced from 1 January 2022.

Contact any of our team if you need further information.