Key measures of upcoming budget revealed

Finance Minister Paschal Donohoe confirmed that a review of the LPT has been postponed. Picture: Julien Behal

Homeowners will avoid significant property tax hikes and people living in new homes will pay nothing for at least another year.

A review of the local property tax (LPT) has been deferred for a fourth time, meaning there will be no changes in 2021, however, homeowners and motorists will still be caught by increases in carbon tax in the upcoming budget.

The Government is now working off the assumption that the UK will crash out of the EU without a deal in January and will be borrowing between €15bn and €19bn next year before extra Budget measures are even taken into account.

Public Expenditure Minister Michael McGrath has said: "there isn't anything that the Irish Government could do that will come close to matching the scale of the disruptive impact" a no-deal Brexit will have.

Income tax will not be touched in Budget 2021 and the Government will focus on supporting businesses and specific sectors that have been worst hit by the pandemic.

Public Expenditure Minister Michael McGrath. Picture Andy Gibson

Ahead of next month's budget, Mr McGrath and finance minister Paschal Donohoe have revealed:

• Carbon tax will be hiked. It is expected to go up by another €6 per tonne which is the same as last year;
• No changes will be made to income tax credits or bands, USC or PRSI;
• Spending this year is 23% over what had been expected at the start of the year due to Coivd-19;
• No decision has been made on changes to social welfare payments;
• There will be no further tinkering with the pandemic unemployment payment rates.

It comes as Mr Donohoe confirmed that a review of the LPT has been postponed, meaning there will be no changes in the amount charged until 2022 at the earliest.

The deferment also means around 100,000 homeowners who bought new-build homes since 2013 will be exempt from paying anything as they have never been the subject of an evaluation.

Mr Donohoe said: "As with many aspects of our economy, the pandemic has introduced volatility into the residential property market and I am also conscious of the need to allow sufficient time for the Revenue Commissioners to introduce the necessary changes to the LPT regime before any new valuation date."

Mr Donohoe said he would bring forward legislation in 2021 to bring new homes that are currently exempt from the LPT into the taxation system.

Meanwhile, the budgetary watchdog, the Irish Fiscal Advisory Council, has urged the Government to launch a “substantial” five-year stimulus package as part of Budget 2021.

The council effectively wants the October budget to be packaged as a five-year fiscal roadmap for the country; setting out spending and taxation intentions for the next five years and including an enhanced rainy-day fund and economic contingency measures in case of a no-deal Brexit and further economic hits from the Covid-19 pandemic.

“Budget 2021 should ensure that there is a substantial multi-year stimulus in place for 2021 and beyond to continue targeted support measures and to support demand,” said Ifac chair Sebastian Barnes.

“Given the high uncertainty around Covid-19 and Brexit, putting in place an appropriately-sized contingency would help manage risks,” he said.