Budget 2020 Highlights / October 2019

Minister Paschal Donohue has just finished delivering his Budget 2020.

We have outlined below the points that we feel are relevant for Personal Financial Planning only.

Backdrop (Brexit Brexit Brexit)

  • Minister Donohue outlined how Brexit is the ‘Central Assumption’ for Budget 2020 and Ireland is ‘ready to act’ in the event of a no-deal Brexit and to intervene is a “sustained & meaningful” way.

  • Brexit is the “most pressing and immediate risk” for our Economy and Budget decisions have been influenced by a no-deal scenario.

  • A Brexit Fund of €1.2bn was announced to respond to Brexit: €200m of Brexit Expenditure in 2020.

  • Minister Donohue noted how our deficit in 2019 is now gone and the Department are projecting a surplus of 0.20% of National Income this year. However, in the event of a disorderly Brexit. a deficit of 0.60% could be expected next year

  • An additional 19,000 jobs are expected to be created in 2020

Investment & Entrepreneurship:

  • Employment & Investment Incentive (EII) Scheme:

    • Limit per Investor is increased to €250,000.

    • A new tax relief regime of 40% in Year 1, rather than 30% in Year 1 and 10% in Year 4

  • No changes to Capital Gains Tax Entrepreneurial Relief (10% on the first €1m), but the Department of Finance will be “reviewing” it for next year

  • Earned Income Tax Credit for Self-Employed is increased from €1,350 to €1,500

  • Significant changes to the KEEP Share Option Scheme: Details to follow in Finance Bill

Wealth Management: Capital Taxes:

  • Group A Threshold increased from €320,000 to €335,000

  • No mention of Group B & Group C thresholds. This may be contained in the Finance Bill

  • No mention of any change to the 33% CGT rate

Property

  • Stamp Duty on Commercial Property to be increased from 6% to 7.5%

  • Targeted Changes to the Real Estate Investment Trust (REIT) tax regime

Other Significant Measures:

  • Capital Funding of more than €1.1bn to deliver 11,000 social homes in 2020

  • Excise Duties on 20 Cigarettes up by 50c

  • Increase of €5 per week on all Social Welfare Payments

  • Help to Buy Scheme extended to 2021

  • As expected, the 12.5% Corporation Tax rate was no impacted

Pension Contributions: TIPs

With the 2018 Pension Contribution deadline approaching, here are a few Nuggets of Pension Info:

  1. The deadline date for maximising 2018 Pension Contributions is 31 October 2019 (if filing your tax returns manually) or 12 November 2019 (if filing online through ROS)

  2. These deadlines are for Personal contributions only. Tax Relief on Employer contribution is dependent on the Company Tax Year End and nothing to do with the personal tax return deadlines

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Jonathan Sheahan Sunday Times Article 18th August 2019

Every 6 weeks, on a Thursday, the European Central Bank (ECB) Governing Council convenes and outlines their economic outlook and what changes, if any, there are to the ECB Monetary Policy going forward.

Nowadays, these ECB Meetings hardly hits the airwaves in Ireland, mainly because we have grown accustomed to the lack of movement in the base ECB refinance rate and the fact that most of the outlook statements and press conference questions are Europe-general as opposed to Ireland-specific. Stories around Trump and Brexit are far more exciting, controversial and colourful.

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Financial Planning in Retirement

The 2 years before an individual (or a couple) are approaching retirement from Employment / Self-Employment plus the 2 years after retirement age are the 4 most important years for any individual in terms of Personal Financial Planning.

The obvious big financial change at retirement will be the cessation of Earned Income or Salary as soon as you leave service. While this huge drop in income may be somewhat offset against mortgage repayments ending (assuming that your mortgage term ended around the time of retirement), there is nevertheless going to be a fundamental shift in your Cashflows, with a reliance switching from Earned Income to Passive Income in Retirement.

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Sunday Times Q&A 21 April 2019 with Jonathan Sheahan

Question: My husband & I are both 60-ish and about to close on a sale of a property he inherited which we hope to receive approximately €160 K after taxes, fees, etc. At present we have our mortgage & car loan paid with three children finished education & supporting themselves. Our credit card & a small home improvement loan totaling €7 K will be paid off first of course, and we are planning to retire a couple of years before both our contributory pensions kick in at age 67. We don’t have a clue where we should park the bulk of this for 3-5 years? Are there really any safe & profitable positions to take?

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Investment Market Update

The first 7 weeks of 2019 has seen a big recovery in global Equity Markets, after an extremely negative and volatile fourth quarter of 2018. Throughout the end of last year, we witnessed indiscriminate selling across the board on behalf of global fund managers, mainly due to risks around US-China trade relations and fears of a Global slowdown. Since the turn of the New Year, as these fears have subsided somewhat, we are seeing more positive sentiment in markets and therefore a large recovery in asset prices (albeit off sharp lows).

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Sunday Times Article / Jonathan Sheahan / 27 May 18

Within the recovering Irish economy, which is set against a backdrop of increased asset prices (property and company valuations), higher incomes and lower interest rates on borrowings, it is a lot more common now for individuals and families to see their bank balances reporting a healthy cash surplus.

I will define surplus capital as having more than 6 months of your total outgoings sitting in cash deposits. Having this surplus capital can be as a result of one-off events such as an inheritance, a sale of an asset (shares in a company or property) or simply due to consistent earnings from business or employment.

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Euro / Dollar Exchange Rate

The European Central Bank (ECB) held its first Interest Rate decision and Press Conference of 2018 last week and investment & currency markets were left with a very bullish view on the Euro vis-à-vis other currencies, most notably the Dollar.

Mario Draghi ultimately gave direct & indirect guidance that convinced the Market that the ECB will continue to tighten monetary policy, which had the effect of strengthening the Euro. Draghi also specifically pointed out that the Currency movements are not the remit of the ECB, which gave the market more impetus for a strengthening Euro, especially when compared to the 'weak-dollar policy' of the Trump Administration.

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Buying Property within your Pension

Following up from our Property-focused Breakfast Seminar in the Marker Hotel on 29 September 2017, we are seeing more and more people interested in allocating capital to Property within their Pension Funds.

In our experience, there is certainly a lack of understanding about how Property can be purchased within a Pension Fund, so the aim of this article is to outline the options available. 

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