Tax burden reduced from today - but many will actually end up worse off
Workers are set for some easing of the tax burden from the first day of the new year.
But the benefits will not be big, and the decision not to link changes in tax and benefit rates to expected wage growth will actually reduce average household disposable income, according to an analysis by the Economic and Social Research Institute.
There will be changes to tax bands, cuts in the USC and other measures, which all kick in from today.
Those households where a spouse cares for people in the home are the biggest winners, thanks to the increase in the home carer tax credit.
Every tax-paying worker will end up paying less from the rise of €750 in the income tax standard rate band.
What this means is a single earner will stay on the 20pc income tax rate until their income hits €35,300. This is up from €34,550 in 2018.
Married couples will be able to earn €44,300 before hitting the top 40pc income tax rate. This up from €43,550.
These changes to the entry point to the higher income tax rate are worth about €150 to the average worker.
Among the big winners will be families with one spouse caring in the home. This is due to the fact the home carers' credit goes to €1,500, in a move that will benefit 80,000 families. This means they can earn an extra €300 before they pay tax.
One spouse can work part-time and still benefit from the home carer credit, providing their income does not exceed €7,200.
Two weeks of paid parental leave will be available from next November.
On the tax front, there are also changes to the universal social contribution (USC).
The USC rate of 4.75pc will drop to 4.5pc. It applies to income between €19,372 and €70,000. Most middle-income workers will gain about €90 from this USC cut.
Low-paid workers 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 this year.
Tax changes, particularly the home carer credit increase, will mean a single-earner household on €55,000 in the private sector, where there are two children, will be €550 better off a year, according to the Department of Finance.
However, a family on the same single income that has no children will only be €252 better off, from the income tax and USC changes.
This figure is lower because this family does not get the home carer credit.
The minimum wage will increase from €9.55 per hour to €9.80 per hour with effect from January 1. This will benefit 151,800 employees, according to the Department of Social Protection.
And the threshold for employers' rate of PRSI (pay related social insurance) will increase from €376 to €386, from the same date, ensuring they are not faced with extra PRSI costs because of minimum wage increase.
A 1pc VRT surcharge is being brought in for diesel engine passenger vehicles registering in the State from today.
The VAT rate on tourism activities are to increase to 13.5pc, with the exception of newspapers and sporting facilities.
Services and goods currently applying at 9pc will increase to 13.5pc from the start of January.
An analysis of the Budget measures by the Economic and Social Research Institute (ESRI) found that most people lost out, particularly lower middle-income households.
The think tank has found that the tax and benefit changes would reduce the disposable income of an average household by about 0.7pc compared with a situation where tax credits, tax thresholds and benefit payments had increased in line with the levels of wage growth expected.