Monday 23 September 2019

Budget 2018: Income tax and USC changes worth less than €10 for families

How much better off will you be following Budget 2018? Our Personal Finance Editor examines the end result of the measures introduced by Finance Minister Paschal Donohoe

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Charlie Weston Personal Finance Editor

CHANGES in income tax thresholds and the universal social change (USC) will benefit the majority of workers and those with private pensions.

A family with one salary of €55,000 and two children will be some €8 a week better off from the income tax and USC changes, which are set to take effect from January.

A €750 increase in the income tax standard rate band will mean that a single earner will be able to earn up to €34,550 before moving from the 20pc rate to the 40pc rate.

At the moment, income above €33,800 is taxed at 40pc.

The 20pc rate of tax kicking in at a higher level means that a worker will be €150 a year better off.

For a couple with one income, the top 40pc income tax rate will apply from earnings of €43,550.

At the moment, earnings over €42,800 are taxed at 40pc.

Families with children or a dependent relative will benefit from a rise in the home carer tax credit. This goes from €1,100 to €1,200. That is essentially an extra €100 that can be earned before income tax applies.

And the self-employed will gain from a higher tax credit. What is called 'the earned income credit' goes up by €200 from January to €1,150.

Finance Minister Paschal Donohoe is also lowering two of the USC rates and changing some of the thresholds that specify at what income levels the USC applies.

The controversial USC hits most people with an income and was introduced during the financial collapse in an effort to shore up the State's finances.

The Government has decided to reduce the 2.5pc USC rate to 2pc.

Up to the Budget, this rate applied on income between €12,012 and €18,772. But the minister increased the ceiling for the 2.5pc rate from €18,772 to €19,372.

The 5pc USC rate will be reduced to 4.75pc. This is the rate that applies on income between €19,372 and €70,044.

The self-employed will continue to pay an extra 3pc USC surcharge on income over €100,000.

All of the changes will mean that the marginal tax rate on income up to €70,044 will go down from 49pc to 48.75pc.

The changes mean that a married couple, with one income and two children, on a private sector salary of €14,000 will be just €10 a week better off.

The same type of family, if it earned €170,000, will be €8 a week better off.

Partner at KPMG Robert Dowley said the Budget had reduced the gap between the self-employed and PAYE workers in relation to the tax-credit differential.

"Nevertheless, the self-employed credit still remains some €500 below the equivalent PAYE credit," he said.

He was disappointed that there was no changes in the tax-free threshold for children inheriting property and other assets from their parents.

Irish Independent

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