Thursday 23 February 2017

Most of us haven't had it so good - income tax wise - since 2010

Brian Keegan

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Brian Keegan

AS expected, USC was the big-ticket item. The changes, which kick in next January 1, will have the most impact and affect the biggest pool of taxpayers.

The increase in the USC entry point from €12,012 to €13,000 will see 42,500 taxpayers removed from the USC net altogether. The reduction of the 7pc, 3.5pc and 1.5pc rates to 5.5pc, 3pc and 1pc respectively will cost the Exchequer around €560m.

That big money translates into savings for almost all of us, but how much? A single person earning €20,000 should see a saving of just under €500 while a single person earning €70,000 would have an extra €900 in their pocket. A married couple with two children living on one income of €55,000 would see a saving of €990 while the same married couple with an increased income of €70,000 or greater would expect to see €1,200 in savings.

If you're fortunate enough to earn more than €70,000, the additional tax savings are capped at €902. That's because the top 8pc rate of USC remains unchanged.

The self-employed will do a little bit better on top of all that, though admittedly they're starting from a lower base. Employees receive an annual tax credit of €1,650. Currently the self-employed don't, but they will get a new "Earned Income Credit" of €550 in 2016. Next year, a self-employed person earning €70,000 a year will pay €1,452 less in tax. That's only right because people should be taxed on the basis of how much they earn, not how they earn it. There's still some way to go, though, before there is equality of treatment between the employed and self-employed. The 3pc USC surcharge on the self-employed on incomes over €100,000 remains.

There's a really useful, if modest, tax credit for people crossing the PRSI threshold at €352 per week and jumping from a zero contribution to a 4pc contribution. Otherwise for most of us, that's about all there is in the Budget package. There were no changes to income tax, VAT, drink or fuel. Cigarettes have gone up 50c a pack, which the minister singled out as his only tax increase. These are worthwhile tax reductions. We're not quite back to the pre-recession tax levels, but on average, for most of us, taxes haven't been this low since 2010.

Brian Keegan is Director of Taxation with Chartered Accountants Ireland

Irish Independent

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