Budget 2021 was delivered by the Minister for Finance, Paschal Donohoe and the Minister for Public Expenditure and Reform, Michael McGrath against a backdrop of a global pandemic and a possible no-deal Brexit.

Attempting to helm the economy through the Scylla and Charybdis of Covid-19 and Brexit, the Ministers presented the budget as one which not only had to address these immediate threats but also advance efforts on the expressed core missions for the Government: more homes, improved healthcare and a better national response to climate change.


The Ministers introduced a total budgetary package of over €17.75bn – more than €17bn of expenditure and €270m in taxation measures. Described by the Minister as “unprecedented in both size and scale” it will be applied to support:

  • Public services to address the challenges of Covid-19 – €8.5bn, including €2.1bn in contingency funding.
  • Supporting existing services, in particular the Department of Health – €3.8bn.
  • Core capital programmes spending increase – €1.6bn.
  • A Recovery Fund to stimulate demand and employment – €3.4bn.

In addition to snaffling the Rainy Day fund established two years ago, Minister O’Donohoe announced the intention to apply to the EU SURE (European instrument for temporary Support to mitigate Unemployment Risks) fund, which could bring nearly €2.5bn and an intention to apply for funds under the Brexit Adjustment Reserve being established.

Protecting Lives – Health measures

It was always going to be about Health. Minister McGrath announced an extra €4bn for the health service in 2021.

These resources are intended to deliver:

  • Capacity for 100,000 tests a week, supply PPE where needed and continue all of the necessary Covid-19 Action Plan measures which have been put in place since March into 2021.
  • An additional 1,146 acute beds.
  • An increase in permanent adult critical care beds from 255 pre-Covid to 321 by end 2021.
  • 1,250 community beds in 2021, to include over 600 new rehabilitation beds.
  • 5 million additional homecare hours.
  • The implementation of the Sláintecare Public-Only Consultant Contract and for the accelerated implementation of a number of national strategies, including the National Cancer Strategy, the National Maternity Strategy, the National Trauma Strategy; as well as the roll-out of other social care strategies.
  • €5m for development of community-based dementia services and supports.
  • An additional €20m in current year funding for voluntary disability service providers to support the Transforming Lives Programme.
  • €10m in current year funding to voluntary hospices.
  • €50m for new drugs; and €25m for Healthy Ireland and the National Drugs Strategy.
  • €38m to implement the national mental health strategy.
  • €100m to provide disability supports for school leavers, deliver the resumption of day services, promote disability integration and deliver respite services, de-congregation and increase personal assistant hours.

Protecting Livelihoods – Economic Supports

Recovery Fund

Minister O’Donohoe announced the establishment of a €3.4bn Recovery Fund to help to stimulate increased domestic demand and employment. The Fund will focus on three main areas: infrastructure development, reskilling and retraining, supporting investment and jobs.

Supporting Business and the Self- employed

  • Support for early stage seed and growth capital – an intention to establish an equity fund with a mandate to invest in domestic, high innovation enterprises, supported by European capital and an initial €30m in funding through the Ireland Strategic Investment Fund (ISIF).
    An intention to assess and enhance the operation of the Employment and Investment Incentive Scheme.
  • An extension of the tax warehousing scheme to include repayments of Temporary Wage Subsidy Scheme funds owed by employers and to the 2019 balance and 2020 preliminary tax obligations of the self-employed. Affected taxpayers can defer payment for a period of one year with no interest and 3% thereafter, but with no surcharge.
  • An extension in some form to the Employment Wage Subsidy Scheme past its current expiry date of 31 March 2021 to the end of 2021; the Government to decide on the form of its extension when economic conditions are clearer.
  • A further commercial rates waiver for the final quarter of 2020.

Covid Restrictions Support Scheme (CRSS)

A new scheme to until 31 March 2021 will provide targeted support for businesses, whose trade is significantly impacted or temporarily closed as a result of the restrictions. It will operate when Level 3 or higher is in place and to cease as restrictions are lifted.

The Scheme applies to accommodation, food and the arts, recreation and entertainment sectors at Level 3, though other sectors may qualify if we move to higher levels of restrictions.
Qualifying businesses must demonstrate a severe impact on turnover, namely an 80% drop on the corresponding period in 2019.

Qualifying businesses can apply to the Revenue Commissioners for a cash payment in respect of an advance credit for trading expenses for the period of the restrictions. The payment will be based on 2019 average weekly turnover, calculated on the basis of 10% of the first €1m in turnover and 5% thereafter, based on average VAT exclusive turnover for 2019 and subject to a maximum weekly payment of €5,000.

Brexit and the Shared Island

€340m of voted expenditure will be spent on Brexit supports in 2021. This will include additional expenditure to finalise work at ports and airports and to provide for around an additional 500 staff for operationalising checks ahead of January 1.A new multi-annual capital funding for the Shared Island Initiative of €500m over 5 years to fund new investment and development opportunities on a North / South basis and support cross border projects.

Capital expenditure investment €11bn will support capital investment including:

  • Construction road projects such as the N56 in Donegal, the N4 in Sligo, the N5 in Mayo, and the N22 and Dunkettle Interchange in Cork.
    The purchase of 41 additional InterCity Railcar carriages and signing of contracts for the largest ever fleet expansion with potential for up to 600 electric carriages as part of DART+.
  • €132m in funding for the National Broadband Plan.
  • €270m to support up to 20 higher education building projects.
  • €131m for Defence, to include equipment replacement and renewal and infrastructure development across the Army, Air Corps and Naval Service.
  • Investment in our ports and airports, including at Dublin Port and Rosslare Europort and a €10m provision to address challenges facing Cork and Shannon Airports.

Housing and Homelessness

Minister McGrath announced the provision of €5.2bn to the Department of Housing, Local Government and Heritage in 2021, and an increase of €773m on 2020.

Funding will support both homeless programmes, affordable housing and cost rental schemes. The Land Development Agency is anticipated to play a major role in the Government’s Affordable Housing Strategy and on enactment of anticipated legislation will have over €1.2bn of funding available to it.€500m will be directed towards the construction of 9,500 new social housing units in 2021 and €65m to be available to fund deep retrofitting of social housing stock.


In addition to capital expenditure on schools, Minister McGrath announced:

  • €2bn allocated to support children with special education needs, to allow for hiring of 990 additional SNAs and 403 additional teaching posts.
  • A reduction in the staffing schedule at primary level by 1 point to 25:1 by providing for over 300 mainstream teaching posts.
  • €3.3bn allocation to the Department to provide for additional third level places with increases in grant support.
  • Once off funding of €50m for extra supports for the students across this sector, with details to follow.

Social Protection

A package of €510m was announced to maintain headline rates of social welfare in 2021 and deliver targeted improvements in the social welfare code. Supports include:

  • Earnings disregard for self-employed recipients of the Pandemic Unemployment Payment (PUP) to allow them to take up intermittent work without losing the benefit.
  • A reversal of the planned increase in the pension age to 67 on 1 January 2021.
  • Payment of the Christmas bonus to those in receipt of social welfare support and job seekers benefit for longer than 4 months (as opposed to the usual 15), ensuring that most people on PUP will receive a bonus.



  • The VAT rate for the hospitality and tourism sector to reduce from 13.5% to 9% from 1 November 2020 until December 2021 Business
  • Knowledge Development Box relief extended to end December 2022.
  • Section 481 regional uplift extended for an additional year at its peak rate of 5% to December 2023.
  • An intention to develop a tax credit for the digital gaming sector, with a view to supporting qualifying activity from January 2022 onwards.

Capital Gains Tax Entrepreneur Relief

  • An amendment to the shareholding requirement, to permit an individual holding a least 5% of the shares of a company for a continuous period of any three years to qualify instead of the previous requirement, where the interest had to be held for a continuous period of 3 years in the 5 years immediately prior to the disposal.

Climate Change Taxes/ VRT

  • The accelerated capital allowances scheme for energy efficient equipment years to 31 December 2023 with the energy efficiency criteria for the scheme to be re-assessed.
  • €7.50 Increase in Carbon Tax Rate from €26 to €33.50 per tonne/CO2.
  • An overhaul to the VRT system to transition to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions system from January 2021 – VRT rates will be based on emissions performance levels closer to real world performance levels and the introduction of a third Motor Tax table for new cars to take account of the WTLP emissions test.

Personal Income Tax

  • A rise to €20,687 for the second USC rate band – to ensure that a full-time adult worker on the hourly minimum wage (€10.20 per hour) remains outside the top 4.5% rate.
  • An increase in the weekly threshold for the higher rate of employer’s PRSI from €394 to €398 to ensure that there is no incentive to reduce working hours for a full-time minimum wage worker.
  • An increase of €150 to the Earned Income Credit thus equalising it to the PAYE Credit (€1,650).
  • An increase in the Dependent Relative Tax Credit from €70 to €245.
  • Whilst there were no new reliefs for home working, the Minister for Finance noted that this was being reviewed by an Inter-Departmental Group and highlighted existing provisions:
    • an employer can make a payment of up to €3.20 per day without BIK applying to support homeworking expenses;
    • a worker who does not receive a contribution may claim a tax deduction for utility expenses such as heat and light – and, new for 2020, the cost of broadband (details to be set out in the Revenue guidance); and
    • vouched expenses incurred “wholly, exclusively and necessarily” in the performance of the duties of their employment can be claimed – a notoriously difficult criteria to satisfy.

Stamp Duty

  • Farm Consolidation (Stamp Duty) Relief extended to 31 December 2022.
    Consanguinity (Stamp Duty) Relief extended to 31 December 2023.
  • Residential Development (Stamp Duty) Refund Scheme extended to 31 December 2022 with minor amendments.


  • Revised balancing charge rules for intangible assets acquired after today with effect from 14 October 2020 to ensure they come fully within the scope of balancing charge rules.
  • Ongoing implementation of the EU Anti-Tax Avoidance Directive, or “ATAD”, since Budget 2019 to continue with the introduction of interest limitation and anti-reverse-hybrid rules, with a technical amendment to the Exit Tax rules to clarify the operation of interest on instalment payments.

Customs & Excise

And finally, the old reliable: excise duty has again been increased on tobacco products again this year with an additional duty of 50 cent per pack of 20 cigarettes.

Key contact

Nicola McGrath

Nicola McGrath

Partner, Corporate
Dublin, Ireland

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