Budget 2016: Round-up
The Budget 2016 tax changes will mean gains for taxpayers ranging typically from €500 a year to €1,000, with some running close to €1,500 a year.
The only tax increase in the package is a 50 cent rise in the price of a pack of 20 cigarettes.
The gains vary significantly however, and many of those earning about €25,000 are not helped by the way the Budget is structured.
In contrast, the self-employed are big winners and public servants will see big gains, benefiting from the Budget deductions in the pension levy announced as part of the Lansdowne Road deal.
- Biggest gains for most relate to the change in the universal social charge (USC). This means that, overall, the calculations are reasonably straightforward for most taxpayers, though they are a bit more complicated for lower earners, where a proposed increase in the minimum wage and a tweak in the PRSI regime complicated things a bit.
For a single earner or a married couple with one income, the annual overall gains top €500 at income levels of €45,000 and top out at just over €900 a year at incomes of €70,000 or higher.
The reason the €70,000 worker gets more than the €40,000 one is that more of their income is exposed to USC, so they gain more from the big change – the 1.5 point cut in the standard USC rate to 5.5 per cent.
This rate applies to the portion of earnings between about €17,000 and €70,000.
Because of the proposed increase in the minimum wage, which is counted in for the Government figures – though of course the employer will be paying it – the income gains at lower earnings levels between €13,000 and €17,500 a year also show significant increases.
A single person of a one-income couple earning €15,000 a year gains over €900. This assumes the employee currently earns the maximum existing minimum wage, the employer pays the full increase and that there is no resulting reduction in hours worked.
A change to the PRSI system, which will cut the bill for lower earners, means employees will keep fair amount of the minimum wage rise.
However, the employee or single-income family earning about €25,000 is earning too much to benefit from the minimum wage rise and too little to get much from the USC changes, even though the two lower USC rates are also cut.
If they have no children, their gain is just €227 a year
The €5-a-month increase in child benefit will add €60 per child per year; when the impact of family income supplement is added, this will also boost the income of relatively lower-earning couples.
So a couple with one earner and two children on an income of €25,000 would gain €500 a year. For families on higher incomes of €70,000-plus, the addition of two children brings the average gain to over €1,200 a year, and more for bigger families.
The other key group to benefit more than the average is the self-employed.
The Minister also announced a tax credit of €550 which goes straight to the bottom line for people in this group.
This is the start of a process of giving the self-employed equal treatment in relation to a €1,650 tax credit previously granted only to PAYE taxpayers.
Gains for a single self-employed person range from €700 on an income of €20,000 to €1,452 on an income of €70,000 or more. This comes from the €500 credit added to the benefit from the USC change.
The biggest winners are self-employed people with children. A married couple with one income and two children where the earner is self-employed gains over €1,750 a year.
Some €1,400 of this relates to changes in the pension deduction agreed as part of the Lansdowne Road deal.