The impact of the budget on people’s income will generally be modest. The gains will vary significantly depending on your circumstances. For a €50,000 single earner, the basic income tax and USC changes will yield around €280, or €4.50 a week. Some other groups will gain €5 or a bit more.
For a significant number of people increases in specific allowances will raise the weekly gains. The most significant is the €300 a year rise in the home carer tax credit, worth €5.77 a week to a partner at home minding children or an elderly relative. So the biggest gainers will be those who benefit from these two allowances which, together with the basic increases, can lead to gains for €14 a week for those on middle incomes.
Remember, too, that with the improving economy, many people will get wage increases and that to ensure tax does not take a higher proportion of their income, credits and allowances would have to be indexed for wage inflation. The reliefs granted have not, in general, gone this far.
Basic welfare gains are €5 a week. In addition, increased numbers will qualify for schemes and payments such as the affordable childcare schemes, which will make a much more significant increase to some families.
There aren’t too many losers, apart from the beleaguered smoker, those buying diesel cars and the likelihood that the VAT increase will lead to higher prices for a meal out or a night in a hotel. Here are what the main measures mean for your pocket:
Income tax changes:
The entry point to the higher 40 per cent tax band has been increased by €750, bringing it to €35,300 for a single earner and €44,300 for a married couple with one earner. To benefit fully from this change you need to earn over the level of the new limits. The gain is €150 a year or around €2.88 a week.
Some tax credits have also been increased. The credit for home carers – available to those who stay at home to mind children or an older person – is increased by €300 to €1,500. And the self-employed tax credit – called the earned income credit – rises by €200 to €1,350. Credits are straight cash gains for those who qualify. Tax relief for landlords is also being widened to allow them to claim 100 per cent of the interest paid on the mortgage.
USC
Changes in the USC will affect large numbers of taxpayers. The main 4.75 per cent rate, which applies on incomes between €19,300 and €70,000 will fall by 0.25 of a point to 4.5 per cent, To get the maximum benefit from this – €127 a year – you need to earn at least €70,000. A €50,000 earner will gain €77 and a €35,000 earner will get €39.25. The entry point to the 2 per cent USC rate has been increased by €500 to around €12,500, meaning those on the increased minimum wage will not have to pay.
Welfare
Welfare rates are to rise by €5 a week across the board. But while taxpayers will benefit from January, the welfare rises will be paid from next March. Some specific measures will lead to higher benefits for some, including an increase in the income disregard for the one-parent family payment and also the working-family payment. There was also an increase of €2.20 a week for children aged up to 12 and €5.20 for those aged 12 to 18 in the qualified child increase, paid in respect of children for people on welfare.
Childcare
The income level for families to qualify for the affordable childcare scheme is being increased. It offers subsidies of up to €145 per week in certain cases. A new paid parental leave scheme will be introduced in November 2019 to provide two extra weeks’ leave to every parent of a child in their first year.
Healthcare
More people will get GP-only medical cards as income limits to qualify rise by €25 a week. For example, the current weekly limit for a couple is €276 for a single person and €400 for a couple, and rises if they have children. There is also a 50 cent reduction in prescription charges to €1.50.
Inheritance tax
A small gain is coming for those expecting an inheritance from a parent. The amount they can inherit tax free has increased from €310,000 to €320,000. The inheritance tax rate is 33 per cent, so that savings on inheritances of €320,000 or more from a parent to a child will be €3,333.
The losers – smokers, people eating out and those buying diesel cars
There is a 50 cent rise on the price of a standard pack of 20 cigarettes. The minimum price will also rise, meaning there will be higher increases on cheap. Smokers are again the losers – and retailers are complaining.
As an extra revenue raiser – and environmental measure – the Minister has also slapped a 1 per cent levy on VRT for diesel cars, which will push up the price of new vehicles.
And the rise in VAT for the hospitality sector will be likely to knock on in increased prices for those eating out.
