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Saturday 10 December 2016

Families with two children suffer tax hit of €3,200

Charlie Weston Personal Finance Editor

Published 03/08/2011 | 05:00

MARRIED couples with two children are paying an additional €3,240 a year in income tax compared with 2007, new figures reveal.

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A family on €60,000 a year, close to the average gross income, is now paying almost €16,000 in income tax.

This is up from €12,500 in 2007, a report by economic consultants Indecon shows.

The new figure is revealed days after it emerged the Government has signed up to €1.5bn of new tax increases for the next Budget in an update of the bailout agreement with the IMF/EU.

The IMF/EU agreement specifies that personal income tax bands and tax credits will be reduced.

Tax relief for pensions will be curbed, while a property tax will be introduced.

The tax impact of the three austerity budgets so far is now emerging. The average gross income for a married couple with one income and two children has dropped from close to €60,600 in 2008 to €56,500 in 2009, according to the Central Statistics Office. Most commentators feel this figure will have fallen further since.

High earners -- those on €120,000-plus -- have been even harder hit, with a married couple on one income now paying an extra €8,520 a year compared with 2007.

And those on very low incomes have been hit hard by changes in tax credits and alterations in the tax bands.

Someone earning just €15,000 a year is now paying €405 in income tax. In 2007 they would not have paid any income tax. A single person on €20,000 is now paying €940 extra in income tax.

The Government has promised there will be no changes in income tax rates in the Budget in four months.

However, changing the tax credits and altering the tax bands, as was done in the past few budgets, has a dramatic impact on the income tax workers have to pay.

Tax credits are the amount of money you are allowed to earn before paying any income tax. A PAYE (pay as you earn) earner gets an employee tax credit of €1,650.

In the last Budget this tax credit was cut from €1,830, which effectively meant a tax rise of €180 for everyone.

Bands

The tax bands relate to the amount of money you can earn before moving from paying tax at 20pc to 41pc.

These were changed in the last few budgets which meant more income was taxed at 41pc.

Currently, a single person pays tax at the higher rate at income over €32,800, once the tax credits have been deducted.

A single income couple moves to the higher tax rate one over €41,800.

A married couple with two incomes moves to the higher rate on income above €65,600.

The updated IMF/EU document also states that there will be cuts in pensions tax reliefs. At the moment contributions qualify for tax relief at 41pc.

The €100 a year household charge, higher carbon taxes and changes to capital gains and acquisitions taxes are also outlined in the bailout agreement.

Irish Independent

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