USC cuts will mean gain of €5 a week for typical worker
Published 12/10/2016 | 02:30
THE burden of the hated universal social charge is to come down for workers.
Three of the USC rates are being cut, as widely expected.
Workers will be better off by between €130 and €350 a year as a result.
For a typical family on €55,000 a year, the gain will be €5 a week.
However, anyone earning €70,000 or more will be limited to a total gain of €353.
The three lower rates of USC are being cut by 0.5 percentage points.
The 1pc rate, that applies on income up to €12,012, goes to 0.5pc. The 3pc rate goes to 2.5pc. This applies on income between €12,013 and €18,772.
And the 5.5pc rate falls to 5pc from the start of next year.
This means that income between €18,772 and €70,044 will be levied for USC at 5pc.
Minister Noonan said high marginal tax rates act as a brake on employment.
"They discourage people from taking jobs and discourage emigrants from returning home," he said.
He also said that the measures announced in the Budget signalled the Government's intention to phase out the USC over time.
He added: "I am allocating €335m to improve the take-home pay of low and middle-income earners by reducing each of the lower three USC rates by half a per cent."
The minister adjusted the second USC rate band to ensure people earning the minimum wage will still remain outside the top rates of USC.
The changes will mean that a married couple with one income of €35,000 will save €178 in USC.
On a weekly basis this works out at a saving of €3.
If the same couple was earning €55,000 there would be a saving of €278 a year, or €5 a week.
For a €70,000 couple, the saving will be €353, or €7 a week.
There was also a rise of €100 in the home carers tax credit.
This has gone up to €1,100. It means that for a family with a stay-at-home spouse there will be extra relief.
Meanwhile, people who work for themselves were big winners in the Budget.
Almost 150,000 self-employed people are to benefit from a change in the earned income tax credit.
Minister Michael Noonan began last year to give them a larger tax credit.
A tax credit is money you do not have to pay to the Revenue on your income or pension.
The minister increased the earned income tax credit by €400 to €950, which will less tax for the self-employed.
The introduction of the earned income credit is to make up for the fact that the self-employed do not get the PAYE tax credit of €1,650.
KPMG partner Robert Dowley said the tax gap between the self-employed and PAYE workers had been reduced.
"While PAYE and self-employed workers earning up to €70,000 will each benefit from the reduced USC rates, self-employed individuals will also get the benefit of the increase of €400 in the earned income credit which has been increased to €950," Mr Dowley said.
"Nevertheless, the self-employed credit still remains some €700 below the equivalent PAYE credit."