Budget 2023 Breakdown

That special time of year is upon us once again – Budget time. Budget 2023 was just announced, and it was certainly one for the books, coming at a time of continued uncertainty and concern over the exponential increases in the cost of living. With everything from fuel and energy to food and lifestyle items becoming increasingly expensive both employees and business owners have begun to feel significant financial strain in recent months. With this in mind, Minister for Finance, Paschal Donohoe was quick to explain that this Budget would be, by necessity a “Cost of Living Budget” aimed at safeguarding the public during this difficult period.

As always, we have compiled some of the main changes included in this Budget that may affect you and your business.

New SME Scheme:

  • As we have discussed many times in the past, SMEs form the backbone of the Irish Business Landscape, whilst also being among the most vulnerable sectors in need of supports. As part of Budget 2023, it was announced that there will be a new scheme aimed at supporting SMEs during this time.
  • The new Temporary Business Energy Support Scheme (TBESS) will aim to assist businesses struggling with the increase in energy costs this Winter. The scheme will operate on a self-assessment basis and will be open to all businesses who experience increases of at least 50% in energy costs compared to 2021 by having The State pay up to 40% of the costs, capped at €10,000 monthly.
  • It is important to note that the scheme requires approval from the European Commission under state aid rules, but it is expected that the scheme will be approved without issue.
Tax Rate for SMEs:
  • The 12.5% Corporation Tax rate for SMEs is to remain unchanged with the Minister also reaffirming Ireland’s commitment to the OECD international tax agreement in ensuring the minimum effective rate of tax for companies with revenues of more than €750m is set at 15%.
Non-Cash Benefits for Employees:
  • The tax-free limit for non-cash benefits to employees will increase from €500 to €1,000 for this tax year. Employers will be entitled to gift two vouchers or gifts to employees during each tax year.
Sustainability:
  • The push towards sustainability featured in the Budget announcement with a new long-term loan (The Growth and Sustainability Loan Scheme) of up to €500,000 being made available to SMEs to allow them to expand their sustainability and energy efficiency levels or to begin that journey.
  • There will also be a new grant available through Local Enterprise Offices (LEOs) to assist smaller companies in reducing their carbon footprint and increasing the energy efficiency of their businesses. This grant will be named the Small Firms Investment in Energy Efficiency Scheme.
Hospitality:
  • One of the hardest hit sectors during the Covid-19 emergency would be the Hospitality Sector, which remains in need of support. It was announced during Budget 2023 that the 9% VAT rate for this sector will remain in place until the end of Feb 2023.
Taxation:
    • It was announced that there is to be a third taxation rate of income tax, but there is no further information on this at present.
    • The Knowledge Development Box for qualifying companies will be extended to 2027.
    • The Research and Development (R&D) Tax Credit will now have a fixed 3-year payment system, and the current caps in place for the payable element will be removed.
    • The Standard Rate Tax Band will be increased to €40,000 for a single person.
    • Personal, employee and income tax credits will be increased to €1,775.
    • The 2% USC Rate Band will be increased to €22,920.
    • A new tax credit specifically for Renters of €500 per year will be available for the 2022 tax year. This will only be available to renters who are not currently in receipt of any other housing benefits.