In terms of the economic outlook for the next 12 months, there are reasons to be optimistic with strong employment growth, domestic demand and business confidence returning to pre-pandemic levels.
As a result, the government’s 2022 budget has given us a bit of everything, including big spending on services while attempting to offset inflation on people’s income and protect against the rising cost of living.
Here is a summary as to what self-employed trade professionals can expect from Budget 2022:
- Increase in the annual tax credits
- Changes to Vehicle Registration Tax ranging from 1% to 4%
- Increases in fuel costs
- €202 million fund for people to improve home energy efficiency
The big expenditure changes in the budget focused on childcare, healthcare, the continuation of pandemic supports for some areas of the economy still impacted by COVID and on social welfare like fuel allowance.
The changes to the standard rate band, personal tax credit, earned income credit and second USC rate band will decrease the tax liability of a self-employed individual by approximately €415 (where the individual is working and earns more than €36,800 per annum).
There have been no changes to the PRSI rates for the self-employed. The extension of the relief from corporation tax for start-up companies for a further five years may assist those individuals who wish to establish new businesses.
Verdict: First time we’ve had a rate of increase in the credits since 2008, however the rising living costs (inflation forecast to peak above 4% before the end of the year) means that any tax relief will be wiped out by energy and fuel increases.
Vehicle Registration Tax (VRT)
The Government wants around 850,000 ‘electric’ cars on our roads by 2030, which is why the VRT system was significantly overhauled in last year’s budget with low- and zero-emission cars benefiting most.
This year, the government has made some minor adjustments to VRT which from the 1st January will see:
- 1 per cent increase in the rates on cars with emissions between 111g/km and 130g/km
- 2 per cent rise for cars with emissions of 131g/km to 145g/k
- 4 per cent rate increase for cars with emissions over 146g/km
The government has decided to continue to incentivise the uptake of electric vehicles thereby continuing to offer the €5,000 VRT rebate scheme until the end of 2023.
Verdict: These increases on VRT are likely to add to the already heavy tax burden on new cars & vans and could serve to slow down the renewal of the fleet for self-employed professionals (thereby missing emission targets).
The rate of carbon tax will increase by €7.50 per tonne/CO2 from midnight October 12 resulting in a 60-litre tank of petrol costing €1.28 extra and similarly €1.48 extra for a fill of diesel.
In respect of other fuels, from 1 May 2022 and in line with the series of annual increases in the cost of kerosene (900-litre tank up by €19.40), natural gas annual usage up €16.9, pleat briquettes up by 20c for a 12.5kg bale and coal up by 89c for a 40kg bag.
The additional revenue from carbon tax is to be used in social welfare to prevent fuel poverty, sustainable farming practices, and investment in a national retrofitting programme.
Verdict: If you are self-employed and carry-on business from home, be sure to reduce your carbon tax by claiming 30% of the cost of vouched expense for heat, electricity, and broadband as a trading expense against your trading income (this has been the position for several years).
Retrofitting & Renewables
Across Ireland, the target is 600,000 homes to be energy efficient by 2030.
Over €200 million has been allocated for retrofitting over 20,000 homes with half to be spent on 4,500 free home retrofitting for low-income households with the remainder given in grants.
There will also be a modest level of tax relief on personal income for households who sell surplus electricity that they generate back to the grid.
Additional funding will also be provided through the Department of Further and Higher Education to expand training programmes and apprenticeships in the retrofitting and renewables sector with a new Employer Grant for apprentices to be introduced from January 2022.
Verdict: With increased government allocations and increased resources for retrofitting - qualified trade professionals should be looking forward to responding to strong demand across the entire property refurbishment, retrofit and RMI (repair, maintenance and improvement) sector.