The 2023 Budget was announced on Tuesday 27th September 2022. The Budget contained a number of changes that employers and employees need to be aware of from a HR perspective.
What is the Budget 2023?
The Budget is the amount of money the Government has to spend each year, and what it decides to spend it on. On Budget Day, the Government will give a detailed breakdown of how much money it expects to collect in the year ahead (income) and how that income will be spent across all Government Departments (expenditure).
How will the Budget affect HR matters in 2023?
A total of €940 million has been allocated to the Department of Enterprise, Trade and Employment in 2023
- Increase of Tax Rates
Income tax rates will stay the same (at 20% and 40%), but there will be increases to tax credits and changes to the income tax bands for 2023.
The standard rate tax band (the amount you can earn before you start to pay the higher rate of tax) will be increased by €3,200 to €40,000 for a single person and to €49,000 for married couples with one earner.
The following tax credits will increase by €75 to €1,775:
- Personal Tax Credit
- Employee Tax Credit
- Earned Income Tax Credit
There were no changes announced to PRSI rates in the Budget 2023.
- Universal Social Charge (USC)
The Universal Social Charge (USC) is tax you pay on gross income, including notional pay (notional pay is a non-cash benefit, such as benefit-in-kind), after any relief for certain capital allowances. If your total income is €13,000 or less per year, you do not pay any USC. If it is more than €13,000 per year, you pay USC on your full income.
The ceiling for the 2% Universal Social Charge (USC) band will increase from €21,295 to €22,920 in line with the 80 cent per hour increase in the national minimum wage from 1 January 2023. This ensures that full-time employees on the minimum wage will remain outside the higher rates of USC.
- Special Exemption Order for Late Night Hospitality
The cost of applying for a Special Exemption Order for late night opening for bars and
nightclubs will decrease from €110 to €55. The measure will be implemented from midnight on 27 September 2022.
- VAT Rates
The reduced VAT rate of 9% for the hospitality and tourism sector will continue until 28 February 2023.
- Key Employee Engagement Programme (KEEP)
In short, KEEP is a tax advantageous share option incentive arrangement for start-ups and SMEs. Subject to satisfying relevant conditions, no income tax, Universal Social Charge or PRSI arises on the exercise of a KEEP share option and instead capital gains tax arises on the subsequent disposal of the KEEP shares. Such tax efficiency is significant as the employee can use the share sale proceeds to fund their tax liability.
The Budget 2023 measures for KEEP are as follows:
- Increasing the current KEEP limit from €3million to €6million
- Facilitating of the buy-back of KEEP shares from the relevant employee by the issuer company
- Extension of KEEP relief to 31 December 2025
