Since the Budget 2015 announcement, I have received queries about its impact to those on contract assignments.
There have been a number of measures introduced which will affect the computation of PAYE, PRSI & USC payable in 2015, and most importantly, the net take home pay available each month.
I am not an expert in this area and always advise that you speak with a professional who is. As a specialist they can properly advise and outline the particulars associated to working as a Contractor for Contract assignments.
Two such companies are Icon Accounting and Contracting Plus. Having had the pleasure of dealing with both over the past number of years, they were able to provide me with an overview of the tax implications for contractors in 2015.
These are outlined below:
Income Tax Bands & Rates
The standard rate band, (the amount of annual income taxed at the standard rate of 20%) is increasing by an extra €1,000 per year at 20% instead of 41%, yielding an annual tax saving of €210.
- €32,800 to €33,800 per individual
- €41,800 to €42,800 for a married couple.
The marginal rate of income tax is reduced from 41% to 40%. This will yield a tax saving for individuals paying tax at the higher rate.
Universal Social Charge – Increased Exemption Threshold
Individuals with income up to €12,012 in a year will be exempt from the USC. This is an increase of €1,976 on the current exemption limit.
|Revised banding: There are new bands and rates for USC effective from 01/01/2015 as follows:
|First €12,012 at 1.5% First 10,036 @ 2%|
|Next €5,564 at 3.5% Next 5,980 @ 4%|
|Next €52,468 at 7% Over 16,016 @ 7%|
|Over €70,044 at 8%|
The main change to note is the increased rate of 8% for income over €70,044.
- For individuals with non PAYE income in excess of €100,000, this income will be subject to USC at a rate of 11%. The 11% rate will not apply to self-employed contractors in an Umbrella company / PLC as the taxes are operated through the PAYE system.
- Medical card holders with income up to €60,000 will pay a maximum rate of 3.5%.
- PRSI rates have remained unchanged with a rate of 4% for both Class A and Class S contributors.
Water charges tax credit
- A new credit for water charges up to a maximum of €500 per year at the standard rate of 20% was announced. Individuals can reduce their income tax liability by a maximum of €100 per year. This credit will be applied in arrears.
- Individuals can now earn €12,000, up from €10,000, a year from renting a room in their private home tax free.
Relief for First Time Buyers
- A refund of DIRT paid on savings used to purchase a house or apartment will be available by making a claim to Revenue. The refund is for DIRT paid in the 48 months prior to the purchase and the refund is limited to 20% of the amount of the consideration paid. This relief will apply from Budget night (14 October 2014 to 31 December 2017).
Start-up Relief for Entrepreneurs (SURE)
- Extended to individuals who have been unemployed for up to two years.
Foreign Earnings Deduction
- Extended for a further 3 years until 31 December 2017, with the number of qualifying days abroad reduced from 60 to 40 and the minimum stay reduced to 3 days. Qualifying countries extended to include Chile, Mexico and certain countries in the Middle East & Asia.
For further specialist advise in relation to setting up and working as a Limited company contractor, or alternative options to assist in working contract assignments contact: Icon Accounting on: 01-8077106 and Contracting Plus on: 01-6110707. They will also be able to assist in outlining the specific implications of Budget 2015 to your individual circumstances.