My Budget 2019 Wish List

Avoiding the big picture question of whether the government should tax more/less or spend more/less, this is my Budget 2019 Wish List. It’s in no particular order and is definitely not comprehensive – it’s about ending anomalies that have never made sense to me (from a personal not professional point of view). But I guess if there is a theme, it’s all about slimming down those fat cats!

 

  1. End higher rate pension tax relief – it serves only to enrich the wealthy – and use the savings to widen the standard (lower) rate income tax band.
  2. Consider going further and cutting the link between pension contributions and earnings by introducing capped SSIA style pensions for all with a flat rate government gifted discount.
  3. End rental income tax relief for individuals – it’s time to stop subsidising the buy-to-let generation. Why should one asset class get such special treatment?
  4. Eradicate (or tax) child benefit or any other welfare payments that end up in the hands of high earners.
  5. Work on eliminating some of the tax breaks and exemptions (too many to list here) that only benefit rich individuals and corporations.
  6. Level the investor playing field by cutting Fund Exit Tax and DIRT to Capital Gains Tax levels and then cut again (OK this is both a personal and professional gripe).

 

In saying all this, I am no tax guru so I’m sure there are experts out there who will tell me this is all too simplistic or radical or both.

This is not in the interests of my clients (or me) but shouldn’t government policy work for the many not the few?

Inheritance Tax – What You Need To Know

New HomeWith the news that the new government may change inheritance tax rules, it’s worth pausing to consider what the current rules are, what changes could be coming, and what it all actually means for you.

The Definite Bad News

Not only has Ireland the highest ‘death taxes’ in the western world, in recent years increasing property prices, smaller families and lower exemption thresholds have combined to throttle unsuspecting Irish people with massive tax bills. If, for example, you are an only child who inherits the €800k family home, you owe the taxman 33% of the estate less the €225k exemption threshold. That’s an immediate tax liability of €190k you probably hadn’t bargained on.

The Possible Good News

The Irish Times reported on Friday that Fine Gael will raise the parent-child exemption from €225k to €500k so in the example above the tax bill would instead be €99k. A significant improvement for sure but that’s still quite a cheque to have to write (in reality most people in this position are forced to sell the inherited house to pay this bill).

What You Can Do To Reduce Your Children’s Tax Bill

  • Pass on property earlier, ie, before you die – the longer you leave it, the larger in value it grows and the larger the ultimate tax bill for your children.
  • If possible have your child move into the main home earlier – if they live there for 3 years before inheritance then the home becomes fully excluded from the taxable estate.
  • Consider a Section 72 Insurance Policy – specifically designed to pay inheritance tax.
  • Start annual gifting of up to €3k (per parent and per child / grandchild) – this is exempt from the tax.
  • Maximise threshold exemptions by spreading the inheritance among children, sons/daughters-in-law and grandchildren.
  • If you own a farm or a business, there are important exemptions you should know about.
  • Setting up a trust can in certain situations maximise tax efficiency.
  • Get married – passing assets to your spouse is tax exempt.
  • And finally, don’t forget to write a will.