Monday 21 October 2019

Average worker to pay €200 a year more in income tax as bands are not changed

Budget: Finance Minister Paschal Donohoe. Picture Credit: Frank McGrath
Budget: Finance Minister Paschal Donohoe. Picture Credit: Frank McGrath
Charlie Weston

Charlie Weston

Thousands of taxpayers will pay more income tax because of the failure of Finance Minister Paschal Donohoe to make changes to the tax bands and credits in the Budget.

The failure to make the adjustments means it will cost the average worker at least €200 extra a year in tax.

This is because more people will enter the tax net, while others will see more of their income taxed at the higher 40pc tax rate.

It is estimated that more than 100,000 taxpayers will find they are paying more tax on the back of rising incomes.

The failure in the Budget to widen the tax bands, increase the tax credit for PAYE workers, and fact that no adjustments were made to universal social charge (USC) will hit employees in the pocket.

A recent Dáil question asked by Fianna Fáil finance spokesman Michael McGrath revealed that holding off on indexing the tax system would yield an extra €600m in income tax for the Exchequer.

Rising incomes mean more than 28,000 earners will start paying income tax at the standard rate of 20pc for the first time in January, because of the failure to widen the tax bands. The tax band refers to how income is taxed at 20pc.

Any income above that is taxed at 40pc.

A single person pays tax at the higher rate on income over €35,300.

And almost 27,000 taxpayers will be pushed into the higher 40pc tax bracket from January because the tax band was not widened, estimates based on Revenue figures show.

Mr Donohoe also failed to index - or increase - the credits people who pay tax through PAYE receive to stop them paying more tax as incomes rise. A tax credit is the amount of income earned before paying tax.

However, the self-employed saw what is called the earned income tax credit rise by €150 to €1,500 from January. This means they will not have to pay tax on another €150 of income next year. Mr Donohoe's decision not to make changes to the USC will see more people paying higher rates of the charge.

Revenue estimated before the Budget that 18,700 people would pay the top 8pc rate next year if no adjustments were made.

An additional 40,000 people will be pushed from the 2pc rate to the 4.5pc rate. Around 1,100 taxpayers will start paying USC for the first time.

Irish Independent

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