Wednesday 28 June 2017

Tax: Average family to be €3,000 worse off after it all tallies up

Charlie Weston

Charlie Weston

FAMILIES with children will be almost €3,000 worse off from the savage Budget changes announced yesterday.

The changes in income tax alone will suck almost €1,250 out of the pockets of a household on the average family income of €55,000.

On top of this, the family will be down heavily from cuts in child benefit. If the family has three children who still get child benefit, the hit will come to €480 a year from the reductions in this benefit.

Those families that are providing for their future by investing in a pension will end up having to shell out an additional €300, assuming they want to keep putting 6pc of their salary into a pension.

This is because those paying into a pension will now have to pay PRSI (pay related social insurance) and the new universal social charge (a combination of the old income and health levies) on the money going into their pension.

Households will also be hit by higher petrol and diesel prices, in a move that will cost the average driver around €72 a year.

The tax on savings is to rise by 2pc to 27pc.

If the family has another child who is in college, the cost will rise by another €500 in college fees to €2,000 a year for the first child.

Families that have a trade union member lose a tax credit worth €70 a year. Those families who use public transport to get their children to school will see a rise of €50 a year in this cost.

Although there were no changes to the two tax rates of 20pc and 41pc, there are other extensive changes to income tax.

The tax changes see the tax credits being cut, which effectively means people will pay more tax. For every €1 cut in the tax credits an extra €1 in tax has to be paid.

At the moment, a PAYE (pay as you earn) employee gets €1,830 as an employee tax credit. This has gone down by 10pc to €1,650. This effectively means a tax rise of €180.

There is the same reduction in the personal tax credit of €1,830.

The changes in the tax credits alone will cost all PAYE taxpayers €360.

On top of this there has been a change in the tax bands -- this is the amount of money you can earn before you move from paying tax at the 20pc tax rate to the 41pc tax rate.

A single earner will now start paying tax at 41pc when they earn more than €32,800.

Up to now a single or widowed person could earn up to €36,400 before paying tax at the higher rate.

For a married couple with one income, the higher tax rate will kick in on income above €41,800. It is €45,400 up to the end of this year.



Couples

For married couples with two incomes, the level of income where the top tax rate applies falls from €72,800 to €65,600.

The combined changes in the tax credits and the tax bands will mean an estimated additional 300,000 people will be brought into the tax net.

The charge for a private bed in a public hospital will go up by 21pc, a measure which is likely to result in an increase in the cost of private health insurance.

Already this year 34,000 people have cancelled their private health insurance cover.

A rise of 21pc in the cost of a private bed in a public hospital will push up the cost of private healthcare premiums by between 5pc and 10pc. This is on top of any planned private healthcare rise next year. A family with two children will likely see their private healthcare rise by around €240 a year due to the higher costs to the likes of VHI for paying for beds in public hospitals.

Retired people with a private pension have been hit. At the moment, if a they earn less than €20,000 for a single person and €40,000 for a married couple, they pay no tax on their pension. But from next year tax along with the universal social contribution will be paid on income over €18,000 for the single pensioner and €36,000 for the couple.

"After many years of increases in the tax bands and credits, the momentum is now firmly in the opposite direction," KPMG tax partner Eoghan Quigley told the Irish Independent.

"Taxpayers are now faced with further income tax rises in the following Budgets."

Irish Independent

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