Boost for families as Budget day tax cuts kick in today

WORKERS and families are in line for a tax and child benefit boost from today.

The benefit will come from the decisions announced in last October's €1bn Budget.

Even with the introduction of water charges, the Government has insisted that most working families will be better off.

From today child benefit is set to go up by €5 a month per child. This will mean a family with two children will get €120 extra a year.

There are also a number of complex income tax changes that kick in from January 1:

l The cut to the top rate of income tax will mean it goes from 41pc to 40pc.

l The threshold for paying the higher income tax rate goes from €32,800 of income to €33,800.

l There will be an increase in the universal social charge (USC) entry point, from just over €10,000 to just above €12,000. This will take 80,000 workers out of the USC net.

l The lower USC rates will come down.

l There will be a new 8pc USC rate for those earning more than €70,000. There will also be a new 11pc rate for the self-employed.

However, the Economic and Social Research Institute (ERSI) is among those criticising the tax and child benefit changes for being regressive - benefiting richer households more than poorer ones.

And the changes come after household disposable income collapsed by 20pc since 2008.

This means that incomes after taxes are down by a fifth in the last six years, according to the Nevin Economic Research Institute.

Calculations by the Irish Tax Institute show that most earners will be better off in 2015.

But water charges are set to be a new cost of householders, even if the amount due has been lowered following massive protests.

The introduction of water charges will mean that a family with two adults will have to pay €260 for the year, whether or not they have children.

There will be an annual conservation grant of €100, which the Government said will be paid in September.

A family with one income of €35,000 will be better off by €174 from the tax changes and the boost to child benefit in 2015.

This excludes water charges, according to the Irish Tax Institute.

Factoring in water charges and the water grant will mean the family will be just €14 a year better off.

A family with two earners, and two children, on a combined €70,000 a year, will be €468 better off in 2015 from the tax changes and higher child benefit.

The net impact of water charges will reduce this to €308.

If there is one earner in the same-sized family, getting €75,000 a year, the child benefit and tax changes will mean an extra €777 a year.

Water charges will reduce this to €617, once the grant has been paid.

Tax consultant with Taxback.com Barry Flanagan said it was the first time since 2008 that a Budget had actually brought some good news for taxpayers.

"People across the board will have benefitted from the measures introduced by Ministers Noonan and Howlin in Budget 2015."

But he said the benefits would be limited.

"Taking a single person with no children, an individual earning €36,000, or approximately the average industrial wage, will be just under €10 a week better off, with take-home pay up by just over €400 annually."

He excluded the impact of water charges from his calculations.

"Married couples with one earner do not fare quite so well - at the same level of earnings they will net an extra €175 annually - though their take home is still higher than for a single person," Mr Flanagan said.

He said that for those with children, the additional €60 per child a year in child benefit will be very welcome.

He said the good news continues for a married couple earning €70,000 jointly, who can expect an increase of around 1pc - depending on the earnings split - or in the region of €700 extra in their pockets.

But he said the most surprising aspect of the changes is the extra 1pc on USC for high earners.

This will ensure that no matter what your income is, a single high earner won't benefit by more than €747 today in income tax, he said.

Minister for Public Expenditure Brendan Howlin has insisted has insisted the changes are progressive and will benefit to thousands of families.