So how will the budget changes affect the PAYE worker in 2013?
No surprise in the fact that the Minister for Finance Michael Noonan delivered a tough budget on Wednesday 5th December, but what are the main changes that will impact the PAYE worker for 2013? We have outlined them below:
Top ten budget changes to affect the PAYE worker
- INCOME TAX - There were no changes to the Income Tax rates, no reduction in income tax credits and no adjustments to the tax bands.
- UNIVERSAL SOCIAL CHARGE – The only change to USC is for pensioners. The reduced rate of USC for those over 70 years of age with an income in excess of €60,000 will be discontinued from 1 January 2013 and the standard rates of USC will apply.
- PRSI – the € 127 weekly PRSI allowance has been abolished.
- PENSION CHANGES – From 1 January 2014 tax relief on pension contributions will be allowable where the pension schemes will deliver income up to €60,000 per annum. An individual will now be allowed a once-off option to withdraw up to 30% of the value of additional voluntary contributions (AVCs) pre-retirement. Withdrawals will be liable to tax at the individual’s marginal rate. This option will be available for 3 years from the passing of the Finance Bill 2013.
- TERMINATION PAYMENTS – Top Slicing Relief will no longer be available from 1 January 2013 on ex-gratia lump sums in respect of termination and severance payments where the non-statutory payment is €200,000 or over.
- BIK AND PREFERENTIAL LOANS - From 1 January 2013 the specified interest rate used in calculating the taxable benefit for preferential loans will increase from 12.5% to 13.5%.
- MATERNITY BENEFIT – Maternity benefit will be taxable for all claimants with effect from 1 July 2013. This benefit is not liable to USC.
- OTHER INCOMES – With effect from 1st January 2014 PAYE employees will be subject to PRSI on their unearned income including rental, investment, dividends and bank deposit interest.
- MORTGAGE INTEREST RELIEF – Enhanced mortgage interest relief introduced in last year’s budget will end on 31 December 2012. Thereafter anyone who purchases a new residential property will no longer qualify for mortgage interest relief.
- HOME LOANS – The specified rate used to calculate the taxable benefit from home loans will decrease from 5% to 4%.