Investment accounts: Simon Harris to unveil tax savings on Monday

The Government’s new investment account will provide individuals who choose to invest with a simpler and more accessible way to do so. Picture: iStock 

A new state-backed scheme aimed at encouraging people to move their money from standard savings accounts into bonds and shares will significantly reduce the amount of tax people pay on their funds.

The Government’s new investment account will provide individuals who choose to invest with a simpler and more accessible way to do so, but savers will not be allowed to put money into crypto or other “risky” products.

Finance minister Simon Harris, who will publish a roadmap on the taxation of retail investment on Monday, said: “Irish people are good at saving. Every week and every month, people work hard to put something aside to build financial security for themselves and their families.

“But, while we are good at saving, we have comparatively low levels of direct retail investment and as such people are not getting the benefits of greater returns.

“For people who decide that investing is right for them, I want to make sure they have a simple and accessible way to do so,” he said.

The new investment account will be available to Irish tax-resident individuals aged 18 and over who hold a PPSN, with one account permitted per person.

The account will have a tax-free threshold, with a low flat rate of tax applying annually to the value of the account above that threshold. Where the value of the account is below this threshold no tax will be due.

The full details of this will be announced as part of October’s budget.

Account holders will not have to invest a certain amount each year, but an annual maximum contribution limit will apply.

Three in four adults in Ireland have savings or deposit accounts separate to current accounts, according to research carried out for Banking & Payments Federation Ireland (BPFI) last year.

However, the survey conducted by Amárach Research, found that fewer than half (44%) of those polled held any type of investment.

In a bid to entice people to take their money out of regular savings accounts, the existing investment tax regime, including the deemed disposal rule, will not apply to investments held within the investment account.

Currently, investors see their gains taxed at a rate of 38% every eight years, even if they do not sell stocks or withdraw their investments.

Under the changes, qualifying providers will calculate, report and pay any tax due to Revenue on behalf of the investor.

Mr Harris said: “Capital markets should not feel remote or like something that is only for people with significant wealth or financial expertise.

“The investment account is about giving people another practical option.”

He added that it will not be right for everybody, but for those who do decide to invest, the tax system should not be unnecessarily complicated or act as a barrier in itself.“That is what this new account is about. It is another option for people, with a simpler tax treatment the administration taken care of on their behalf,” said Mr Harris.

• Elaine Loughlin, Political Editor