Sunday 22 September 2019

Charlie Weston: Couples who travel to jobs will resent missing out

Stock photo
Stock photo

COUPLES who both work outside the home will not be happy.

That is because the stand-out feature of Budget 2019 is a €300 increase in the home carer tax credit.

This will allow a stay-at-home family with a stay-at-home spouse able to earn €1,500 that they do not have to pay tax on.

This year's increase in the home carer credit is three times that of 2018.

Some 80,000 families are set to gain from the boost.

The credit is for families with a stay-at-home spouse caring for children or an incapacitated person. It generally applies to single-income families with children.

It is given to married couples or civil partners who are jointly assessed for tax, where one spouse or civil partner works in the home caring for a dependent person.

The home carer can work part-time. But if the carer earns more than €7,200 in their own right for the tax year, they cannot claim the tax credit. The tax credit gain is tapered for amounts up to €7,200.

However, the €7,200 threshold leads to anomalies. It means that a single-earning family on €100,000 gets the full €1,500 home carer tax credit from next year.

But a family where one spouse earns €80,000, and the carer is on €20,000 will not get any home carer tax credit.

And stay-at-home parents are the big winners compared with those who do not have children.

Take a family with two children. There is only one earner, with the household on €55,000 in the private sector. This family will be €550 better off a year, according to figures produced by the Department of Finance.

However, a family on the same single income that has no children will be only €252 better off, from the income tax and USC changes.

This figure is lower because this family does not get the home carer credit.

Affordable childcare is a huge political issue.

Yes, the widening of the thresholds to qualify for the affordable childcare scheme means more families will benefit, but the changes are limited to households with a maximum income of €60,000.

This means a husband and wife, who are both on the average wage of €36,000, will not gain from the affordable childcare scheme.

All workers and pensioners will see a benefit from the rise of €750 in the income tax standard rate band for earners.

This means a single earner will stay on the 20pc rate until their income hits €35,300. This is up from €34,550.

The tax band rises from €43,550 to €44,300 for married one-earner couples.

The changes to the entry point to the higher income tax rate are worth about €150 to the average worker.

The USC rate of 4.75pc will drop to 4.5pc. Most middle- income workers will gain about €90 from the USC cut.

The low-paid will be able to earn €19,874 before paying USC, which is up from €19,372.

The tax changes take effect from the start of next year.

Those on lower incomes will see a €25 increase in the back-to-school allowance and increase in social welfare and qualifying child amounts.

Pensioners will gain but, like last year, will have to wait until March to see their €5 a week rise in the State pension. Families on welfare will see a €5 a week rise in welfare payments. The Christmas bonus will be paid, despite doubts about this.

However, with only modest USC reductions and a small change in the entry point to the higher income tax rate, it is the increase in home carer credits that will lead to the biggest tax saving for families.

Families with two incomes and children, but who do not get the home carer credit or qualify for the affordable childcare scheme, will resent this. They are already paying through the nose for childcare.

When it comes to middle- income, dual-earning families, with high childcare costs, the reaction to that will be key.

Irish Independent

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