The 2021 Budget will come as the Covid crisis is hopefully getting better – but it could also be just before a possible No-Deal Brexit.
Some of the expected spending plans might have to be put on hold and some extra revenue-raising measures will probably be needed. The July jobs stimulus introduced several measures – but Budget 2021 will probably have some more supports for businesses such as the Covid credit guarantee scheme, which is due to come online later this month.
The government have confirmed that Budget 2021 will prioritise the response to the COVID-19 crisis rather than ‘normal’ budgetary adjustments. Preserving and maintaining existing levels of service will be the priority.
Budget 2021 will be based on the assumption of a disorderly Brexit
The main priorities will be Health, Housing and Climate change.
Because of the current economic uncertainty, any economic and budgetary projections in Budget 2021 will not extend beyond 2021.
The date of Budget 2021 will be Tuesday 13th October 2020.
Possible Changes in Budget 2021
The Property Tax revaluation has been delayed since 2016. It is now due to happen in November 2020 – so we expect it to be mentioned in Budget 2021.
In early September, Minister Donohoe said he had no plans to increase Income Tax in Budget 2021. The Program for Government also states there will be no increases in income tax or USC rates in Budget 2021.
(On Sept 16th – Minister Donohoe again ruled out changes to income tax credits or bands. )
We expect the Earned Income Tax Credit (Self-employed) might be increased again to match the employee tax credit.
The Home Carer Tax Credit will probably be increased .
The Program for Government stated that any tax rises will be focused on those taxes that tax behaviours. (carbon tax, sugar tax, and plastics).
Carbon Tax – An increase of €6 a tonne is expected as we move from €26 towards €100 per tonne in 2030.
Employers are likely to be hit with increased employers’ PRSI, as has been the case over recent years. Covid will make this more likely.
Motor tax rates could face a major overhaul to try and encourage the take up of electric vehicles.
The VAT rate was cut in Sept to 21 % for 6 months. Of course , this VAT cut could be extended even further in Budget 2021
Excise Duty on Petrol and Diesel.
The gap in duty between Petrol and Diesel is currently 11.6c per litre (higher on petrol). There have been previous suggestions to reduce this gap over 5 years at 2.3c per litre a year. This would mean an increase in diesel of 2.3c a litre if it is cut in Budget 2021.
There is a small possibility of an overhaul of Stamp Duty rates on houses, with rates possibly linked to BER rating, or a reduced stamp duty rate on new houses. A higher rate of stamp duty of properties over €1 million is also strong possibility .However , this change might also have to wait until 2022 or 2023.
Duty on Alcohol and Tobacco
Increases are always possible on both.
Vehicle Registration Tax
We expect some changes in VRT to try and reduce the number of cars sold (new and used) with higher emissions. This item may also have to wait until 2022.
Pensions and Welfare Benefits
Some small changes to welfare benefits and pensions are likely. But will there be a Christmas Bonus this year?
The Pandemic Unemployment Payment may be adjusted (upwards) after it was reduced in mid-September. It may also be changed so that people can do some paid work and still get the payment.
Extension of Parent’s Leave and Benefit – this is currently 2 weeks and is planned to rise to 7 weeks by August 2022. We expect an increase of 2 or 3 weeks.
Other items from the Program for Government that could be mentioned in Budget 2021:
- A reform programme to reduce the costs associated with access to the legal system in Ireland.
- Electricity microgeneration, letting people sell excess power back to the grid by June 2021.
- Mandate public sector employers, colleges, and other public bodies to move to 20% home and remote working in 2021.