If, like many of us, you were paid before Christmas and are so finding January an impossibly long month, there is one bright (albeit small) spot on the horizon. Thanks to changes announced last October, you should get a bit more than you might have otherwise expected when you (finally) get your pay cheque this month.
This means that, even if you’re not in line for a pay rise from your employer this year – and a recent survey by Abrivia Recruitment and the Trinity Business School shows that more than three quarters of employees expect one – your bank balance might still increase.
If you earn more than €13,000
Thanks to a decrease in the universal social charge announced last October, everyone who earns more than €13,000 will see some increase in their pay cheque this month. If you earn less than this you won't be paying USC so there will be no impact.
That’s the good news but the bad news is that the gains won’t be enough to break out the champagne (or even buy a bottle perhaps).
In October, Minister for Finance Michael Noonan cut three rates of USC by half a percentage point, effective as of January 1st, although the top rate remains unchanged at 8 per cent for income between €70,045 and €100,000.
The move means that those on lower incomes will enjoy greater savings. Someone on €18,000 a year for example will receive a 15 per cent reduction in their tax bill, while the average worker will see a reduction of just 2.7 per cent, according to the Irish Tax Institute. Higher earners, or those earning more than €75,000 will see just a 1.3 per cent reduction in their tax bill, on the lower part of their income.
This means that someone earning €20,000 will benefit to the tune of €9 a month, while someone on €40,000 will gain €16 and a person on €60,000 will get €25.
However, once someone surpasses the €70,045 income bracket targeted by the government as entering the “higher earner” zone, the savings stop. Indeed everyone earning above this – whether it’s €80,000 or €200,000 – enjoy the same increase to their monthly take home pay of just €30.
If you’re on the minimum wage
If you're on the minimum wage, you may have already enjoyed a slight bump to your pay cheque, if you're paid weekly or bi-monthly. From January 1st, the minimum wage rose to €9.25 an hour, up from €9.15 previously. It's not a huge increase – it works out at €4 a week, based on a 39-hour working week, or about €200 a year – but combined with the tax changes it is something.
On an annual basis, someone earning the minimum wage can expect to earn about €17,316 a year based on the new increase, and thanks to the tax changes, will also get an extra €7 a month or so.
If you’re a stay-at-home parent
If you or your partner stay at home to care for your children, or an elderly relative, the working spouse is entitled to a tax credit which can help ease the financial burden. And the credit just got bigger, thanks to October’s budget.
From January 1st, provided that the stay at home partner doesn’t earn more than €7,200 in one year, the working spouse can claim a credit of €1,100, up from €1,000 last year, and from €810 previously.
This means that someone claiming the credit will pay €100 less in tax this year, or €8.30 a month.
If the stay-at-home partner's income is in excess of the limit, the credit may still be of use, as long as it doesn't exceed €9,400 (this is also up for €2017, from €9,200 in 2016), as the difference between the actual income, and €7,200 is calculated and then halved. So, for example, if the stay at home parent earns €8,450 from an online business they may have, their partner's credit will be reduced to €475.
If you think you’re entitled to this credit but aren’t familiar with it, get on to Revenue or apply via their MyAccount system . Figures show that 81,000 taxpayers benefited from this relief in 2015, but it is estimated that far more people should be entitled to it, and the credit can be backdated by up to four years.
A point to note however is that cannot claim both the higher standard rate cut-off point for dual income couples and the Home Carer’s Tax Credit, so depending on your income, you might find the credit doesn’t apply to you.
If you’re self-employed
Bear with me on this. Yes, changes announced in Budget 2016 and Budget 2017 mean that self-employed people can begin to claim an earned income credit of €550 for 2016 and €950 for 2017, which will help defray their tax bill.
Of course, self-employed people only pay tax on a look-back basis which means that they have just paid taxes for 2015. However, they will also have paid preliminary tax for 2016, which means if this is you, you should have factored in the €550 credit to this calculation.
And, if you set aside tax on a monthly basis to help meet the costs of that October/November tax bill, you can apply the €550 credit from this month. The credit reduces the total amount you pay in tax. So, applied on a monthly basis, the credit means that you should set aside €45 less in tax each month.
And again, when it comes to calculating your preliminary income tax liability for 2017 later in the year you could apply the higher credit, of €950, in your calculation.
Landlords, while you may also file tax returns, the aforementioned tax credit doesn't apply to you, as it's only applicable on "earned income" and rent doesn't qualify as such. However, one change in October's Budget which will kick in this year is the increase in tax relief on mortgage interest. This will increase from 75 per cent to 80 per cent for 2017, and to 100 per cent by 2021.
You won’t be able to benefit from the relief until October/November when you file preliminary returns for 2017, but if you account on a monthly basis for your tax bills in order to save for this, you will be able to apply the deduction. The savings won’t be significant however; TaxAssist Accountants say that a landlord paying €3,900 in mortgage interest a year will save just €78 on their 2017 tax bills.
If you did home renovations in 2016
Introduced back in 2013, the Home Renovation Incentive (HRI) allows homeowners and landlords to claim back VAT (13.5 per cent) on eligible expenses incurred in doing up a property. Typically, this includes activities such as rewiring, painting and decorating, new windows and plumbing work. The HRI was extended in last year's budget to end-2018, and the credit puts up to €4,050 back in a homeowner's pocket, as it allows you to claim relief on expenses worth up to €30,000. You must spend more than €4,050 before you can claim the credit.
However, you can only claim the credit in the year after you did the work, and the credit is applied to your taxes over a two-year period. So, for example, if you’ve spent €30,000 or over in 2016, you will get to keep an extra €168 in your pay cheque this month, and every other month over the next two years, if you have applied for the credit. You can do this via the Revenue’s MyAccount system.
Panel: What about social welfare payments?
If you’re a recipient of a social welfare payment, you are also in line for a raise this year – but you’ll have to wait another few weeks to get it.
Increases in a number of social welfare payments aren't scheduled to become effective until the second week in March, with a €5 increase in the state pension kicking in on March 10th, and other payments over the subsequent six days.
The state pension increase means that pensioners under the age of 80 on a contributory pension will be entitled to a weekly payment of €238.30 from March 10th.
Other benefit increases include €5 on a widow/widower/surviving civil partner’s pension, while so-called “qualified adults” over the age of 66 will see their payment rise by €4.50 a week to €213.50.
If you’re planning on taking maternity or paternity leave this year, the rate of payment is also set to rise to €235 a week, while jobseeker’s benefit will go up by €5 to €193.
