Budget 2018 main points: everything you need to know

Cost of 20 cigarettes will increase by 50 cents but duties on alcohol remain untouched

In his maiden budget speech as Minister for Finance Paschal Donohoe set out the first set of budgetary measures from the Government under the leadership of Taoiseach Leo Varadkar.

They include  €1.2 billion in new spending and tax cuts, split on roughly a 2:1 basis in favour of spending.

Total voted expenditure next year would amount to more than €60.9 billion, which was some €12,700 for every person living in the State. Some €55.6 billion has been allocated to current expenditure (a 3.4 per cent increase) as well as €5.3 billion for capital spending (up 17 per cent).

The Minister said he expected continued economic growth which was projected to be 4.3 per cent this year and 3.5 per cent next year. Unemployment is at 6.1 per cent at present and the Minister said he expected it to fall to 5.7 per cent in 2018, having been at 15 per cent at the height of the recession. This, he said, is close "to the level considered to represent full employment" in Ireland.


So how do the measures affect you?

Personal taxation and welfare measures:

*The point at which people enter the higher, 40 per cent rate of income tax will rise from its current level of €33,800 by €750 for a single person to €34,550.

*The 2½ per cent Universal Social Charge (USC) rate is being cut to 2 per cent and the ceiling for this new rate is rising from €18,772 to €19,372. Mr Donohoe said this was ensure that full-time workers on national minimum wage of €9.55 an hour do not pay the higher rates.

The 5 per cent rate of USC is being lowered to 4.75 per cent, which the Minister said would reduce the top marginal rate of tax on income up to €70,044 to 48.75 per cent.

*All social welfare payments, including the State pension, will increase by €5, with the increased payments kicking at the end of March. The social welfare Christmas bonus will be paid at 85 per cent of its usual rate.

*For the self-employed, the earned income credit will increase by €200, bringing it to €1,150 per year from next year.

*The home carers’ tax credit will increase by €100 to €1,200 per year.

*Prescription charges are to be reduced for everyone with a medical card under the age of 70 from €2.50 to €2 per item and the monthly cap for prescription charges decreased from €25 to €20. The threshold for the drugs payment scheme falls from €144 to €134.

*Other welfare increases include One Parent Family Payment and the Jobseekers’ Transitional scheme rising by €20 per week; the threshold for receipt of the Family Income Supplement rises by €10 per week for families with up to three children; and the weekly rate of the qualified child payment is going up by €2 per week. There will be a Telephone Support Allowance of €2.50 per week for those in receipt of both the Living Alone Allowance and the Fuel Allowance.

Old and new reliables:

*The price of a packet of 20 cigarettes and other tobacco products will increase by 50 cent - meaning, on average, a 20 pack will cost about €12 and a 30g pouch of tobacco will be more than €15.

* Duties on alcohol have been left unchanged.

*A tax on sugar sweetened drinks will, from April, be applied at a rate of 30 cent per litre on drinks with 8g of sugar per 100ml. A reduced rate of 20 cent per litre will apply on drinks with between 5g and 8g of sugar per 100ml.

*There will be no change to the taxes on diesel or petrol.

*The State’s 12.5 per cent Corporation Tax Rate remains unchanged.

*The VAT rate for the tourism and services sectors is being left unchanged at 9 per cent.

* The VAT rate on sunbed services increases from 13.5 per cent to 23 per cent in a move the Minister said was due to the link to cancer from the use of sunbeds.

Housing and property:

*The Government is allocating more than €1.8 billion for housing next year with the Minister saying some 3,800 new social houses would be built in 2018 by the local authorities and approved housing bodies.

* Mr Donohoe said there would be an additional €149million for the Housing Assistance Payment, which would enable an additional 17,000 households to be supported and accommodated next year, and a €116 million spend on homelessness, up by €18 million on this year.

*The Minister said he was providing a further €500 million for direct building which he hoped would lead to an additional 3,000 new build social houses by 2021 in addition to the existing 47,000 target.

*A new agency, Home Building Finance Ireland, is being created to use Nama's experience and provide cheap loans to developers. It will be funded by monies from the Irish Strategic Investment Fund (ISIF) to the value of €750 million.

*Mr Donohoe said the stamp duty on non-residential property was lowered to 2 per cent to stimulate the market and "it worked" and now it is being increased to 6 per cent from midnight tonight.

He said this was still well below maximum rate of 9 per cent charged between 2002 and 2008. A stamp duty refund scheme will be available to house builders subject to certain conditions.

*The controversial help to buy scheme of grants for first time buyers, which offers an income tax refund of up to €20,000 for buyers of newly built homes, is being retained.

*The Government is maintaining consanguinity stamp duty relief at 1 per cent for inter-family farm transfers for a further three years.

*Mortgage interest relief for people with loans taken out in period 2004-2012 is being continued to 2020 but at just 75 per cent the rate in 2018, 50 per cent in 2019 and 25 per cent in 2020.

* The seven year period owners must retain qualifying assets to enjoy full relief from Capital Gains Tax is being reduced to four years.

*The vacant site levy, due to take effect from 2019, will increase from three per cent to seven per cent in 2020.


* Mr Donohoe said the health budget would increase by €680 million to €15.3 billion next year, an increase of 5 per cent. He said some of this would be used to recruit an additional 1,800 staff across the acute, mental health, disability, primary and community care sectors.

* The allocation for Tusla, the child and family agency, will be almost €754 million, up some €40 million.

* The National Training Fund levy is being increased next year from 0.7 per cent to 0.8 per cent which the Minister said would provide €47.5million of additional funding for the higher and further education sectors. The levy will rise to 0.9 per cent in 2019 and 1 per cent in 2020.

* The Pupil Teacher Ratio at primary level will be reduced to 26:1 from 27:1.

* The Minister announced a €23 million increase in the Department of Foreign Affairs and Trade’s budget, with some €13 million of this going into increasing the overseas development aid budget.

* An additional 800 gardaí are to be recruited next year and a further 500 civilian staff are also to be brought into the force, the Minister said.

*A Brexit loan scheme of up to €300 million is being made available to SMEs, including food businesses, to help with short term working capital needs. The move is supported by European Commission, European Investment Bank and others.

*The Minister said he expected to raise additional revenues of €830 million as a result of the measures announced in Budget 2018, bringing the total package of new spending to €1.2 billion. Some €898 million of this would be going to the expenditure side and €335 million would be used to cover tax moves.

In conclusion:

Mr Donohoe said budget day offered an opportunity “to reflect on a journey made, to recognise both what our country has achieved and what we want to achieve” in the future.

The aim of the measures was to “safeguard our national finances and help to rebalance our economy; promote fairness and provide for sustained improvements in people’s lives; and make sensible and long-term investments to benefit us now and into the future”.

The Minister said there was a “lengthy” list of potential external risks to the economy including Brexit, potential changes in US trade policy and various geo-political threats that could have impacts on the global economy.

He said balancing the State’s books next year would mean that “we can devote additional resources to tackling the needs of the Irish people and the economy in 2019 and subsequent years”.

“We are increasing our current spending in line with how we expect the economy to grow so, that we can continue, step by step, to deliver sustainable improvements for all,” he said. “And where we are spending more, on our schools, hospitals, homes and public transport we do so to bring a secure, productive and fairer future that bit closer.”