If the previous six budgets have felt like a death by a thousand big cuts, Michael Noonan’s 2015 Budget has brought a little light relief.

(Not least to certain social media types who seem to enjoy him being under the weather as he coughed and spluttered through his speech!).


Pension levy to reduce to 0.15% for 2015 and then end

The Minister has confirmed the commitment from last year to reduce the pension levy to 0.15% in 2015.

The levy will effectively end at the 30th June 2015, i.e. the last valuation date for payment of the levy in 2015. Those who mature their pension benefits before this date will avoid the levy applying to their funds in 2015.

Reduction in the top rate of income tax from 41% to 40%

Clients should maximise their personal and AVC pension contributions for 2014 and backdating to 2013, to benefit from 41% relief.

Increased USC rate of 8% on income over €70,044

This will negate the benefit of the income tax reduction from 41% to 40% for such higher earners, and reduce the relief on personal pension contributions by about 2%

The combination of the reduction in the top rate of income tax at which pension contributions may be offset from 40% to 41% and the increase of 1% in the top rate of USC at which such pensions are not deductible means an approximate 2% reduction in the level of relief available on such contributions for higher earners in 2015.

This again emphasises the benefit of maximising pension tax relief in 2014 and 2013.

DIRT refund scheme for first time buyers saving for a deposit

First time buyers will be able to reclaim DIRT deducted on deposits within the 48-month period prior to the date of purchase of their first home, up to a limit on such savings of 20% of the consideration paid for the new home.

The relief applies to properties purchased between 14th October 2014 and 31st December 2017.

No provision in the Budget speech or accompanying documentation of a similar exit tax exemption for the use of life assurance savings plans for a similar purpose.

DIRT/Exit Tax rates to continue to apply at 41%?

Despite the reduction in the top income tax rate from 41% to 40%, there was no mention in the Budget speech or accompanying documentation of a similar reduction in the DIRT/Exit tax rate, which is currently at 41%.

Pension levy to finally end in 2015

The Minister reaffirmed the commitment in last year’s Budget to reduce the pension levy in 2015 to 0.15% and then terminate the relief. In effect the levy will cease to apply from 30th June 2015 for most schemes, as the levy for a year is set by reference to the value of scheme assets at 30th June.

In total a pension fund of €100,000 at 30th June 2011 will have lost 2.7% or some €2,672 in pension levy deductions if held to 30th June 2015:

As the valuation date for the levy for most schemes is 30th June, the final levy for 2015 could be avoided by taking benefits, if possible, before then. However a decision to take benefits before this date should take account of other factors as well, including in particular the client’s financial needs and objectives, and should not be based solely on a motivation to avoid the last levy deduction.

Reduction in top rate of income tax to 40%, but USC increased by 1% for some higher earners

The top rate of income tax relief is being reduced from 41% to 40% in 2015. This will mean lower income tax relief on pension contributions in 2015.Taxpayers (not being a medical card holder or over age 70) pay USC as follows:



Income over €16,026 to €70,044 7%

Income between €70,044 and €100,000 7%

Income over €100,000 7% (Employees) | 10% (Self-Employed)


Income over €17,577 to €70,044 7%

Income between €70,044 and €100,000 8%

Income Over €100,000 8% (Employees) | 10% (Self-Employed) 11% (Self- Employed)


Therefore those earning more than €70,044 will pay USC in 2015 at 1% higher rate than in 2015, which will largely negate the benefit of the 1% reduction in income tax. This has an unfortunate knock on effect on tax relief on personal pension contributions for such higher earners (i.e. earning more than €70,044 pa). This cohort’s income tax relief on contributions will fall from its current 41% to 40% in 2015, but the non-allowance of such contributions for USC in 2015 at the new higher rate of 8% leads to a double 2% reduction in the value of pension tax relief, as compared with 2014.

Clients, particularly higher rate taxpayers on over €70,000 pa, should therefore consider maximising their additional voluntary contributions (AVC) and personal pension contribution relief in 2014 (and backdated to 2013) to pick up as much relief as they can at the 41% income tax rate with USC at the 7% level.

DIRT refund scheme for first-time buyers

First time buyers who buy their first home between 14th October 2014 and 31st December 2017 can reclaim any DIRT deducted from interest in the 48 month period ending on the date of purchase, on deposits held singly or jointly with their fellow first time purchaser up to a limit of 20% of the purchase price.


Mary and Frank are potential first time buyers saving to buy their first home. They purchase a house for €350,000 in June 2016.Under this new relief, they can following purchase of the house, reclaim the DIRT deducted from any deposits they held singly or in joint names, for deposits of up to 20% x €350,000, i.e. €70,000.

It looks like the 20% limit is related to the highest level of deposits held at any time in the 48-month period prior to purchase of the property. So its not clear how the refund works where savings may have been above and below the 20% limit during this 48-month period prior to purchase of the property.

There is no provision for a similar exit tax exemption where a life assurance savings plan or collective investment fund were used for the same purpose.

DIRT/exit tax rates continue at 41%?

While the top rate of income tax is reduced from 41% to 40%, there is no corresponding reduction in the DIRT/exit tax rate of 41%.

Of course for those earning more than €70,044 pa in 2015, the 1% reduction in income tax is largely wiped out (because of disallowance of various reliefs and allowances for USC which would be deductible for income tax) by a 1% increase in the higher rate of USC from 7% to 8%.

It may be for this reason that the DIRT/exit tax rate was not reduced, i.e. that higher rate taxpayers earning more than €70,044 pa are still effectively on a marginal tax relief of 52%, i.e. 40% income tax + 8% USC.

AVC Access

There was speculation that the 30% AVC access option would be extended beyond its 3 year period and would be made available to personal pension holders, however there was no mention of this in the budget.