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Good, bad and ugly: how your finances will change this year


VOTE-CATCHER: With elections in the offing, it's not surprising that our acquiescence is being bought. Photo: Frank McGrath

VOTE-CATCHER: With elections in the offing, it's not surprising that our acquiescence is being bought. Photo: Frank McGrath

VOTE-CATCHER: With elections in the offing, it's not surprising that our acquiescence is being bought. Photo: Frank McGrath

As Budget Day is almost three months old, many of us have forgotten the changes set to hit our pocket this month. Not to mention the other tweaks announced in previous budgets which are still filtering their way through.

Here are seven ways your finances are changing - for better and worse - this month.

THE GOOD . . .

Heavier pay packets

Most of us should see our take-home pay increase this month (although not too drastically) thanks to the income tax cuts announced for Budget 2015.

A single person earning €35,000 and living at home can expect about €33 extra in take-home pay this month as a result of the cuts. A young and single professional earning €100,000 will see his monthly take-home pay increase by about €50. A married couple who both work and earn €110,000 between them will take home about €99 more a month, assuming one partner earns €60,000 and the other earns €50,000.

Under the income tax cuts, which kicked in at the start of this year, a single person can now earn an extra €1,000 a year before getting hit for the higher rate of income tax, while a married couple can earn an extra €2,000. The top rate of income tax has also fallen from 41pc to 40pc.

The universal social charge (USC), the unpopular levy which has forced many workers to kiss goodbye to more than 52pc of their earnings to tax over the last few years, has been cut for earnings of less than €70,000.

€5 extra child benefit

It won't buy much more than a couple of soothers but all the same, better to have €5 extra in your pocket than out of it.

Monthly child benefit increases from €130 to €135 a child this month. So a family with four children under the age of 16 (or under 18 if the child or children are in full-time education) will be €20 better off a month this year.

€167 more in tax-free rent

Under the rent-a-room scheme, you can earn a certain amount of rent tax-free if you are letting out a room in your main home.

The amount of tax-free rent you can earn under the scheme has increased from €10,000 to €12,000 this year - which means you can now make another €167 a month in rent tax-free.

Pension levy

The controversial pension levy - which is estimated to have taken €2bn from the pockets of those paying into private pensions over the last four years - has been slashed from 0.75pc to 0.15pc this year.

Although this won't put any money back in your pocket immediately, it means that less money will be going out of your pension fund to cover the levy, leaving you with a better pension by the time you retire.

THE BAD . . .

€3 cut in rent relief

In Budget 2011, the then government started to phase out rent relief - a tax break which can be claimed by taxpayers who rent private accommodation. Since then, only those who have been renting continuously on or before December 7, 2010 can claim rent relief and the amount of relief which can be claimed has also been slashed.

Last year, the tax break was worth up to €160 for a single person under 55. This year, the tax break has been cut again and is only worth up to €120 for the same individual, which will take €3.30 a month out of his pocket.

€31 extra a month for student fees

Though you won't be hit for it until September, the annual student contribution charge of €3,000 is now so high that you should start saving for it now if you have a child who will either start or continue college this September.

As the annual student contribution increases from €2,750 to €3,000 this September, you need to save about an extra €31 a month over the next eight months to make up the extra €250.


Tax bill for the honeymoon

As the government tightened up the rules on inheritance tax in the latest Finance Bill, you could now be hit with a tax bill if your parents pay for your honeymoon or allow you to live rent-free in the family's second home - even though you could previously receive such gifts tax-free.

This is because the Government has clamped down on money paid by a parent for the support, maintenance or education of their children.

Parents could previously pay for the support, maintenance or education of their children without triggering a tax bill for their child - regardless of how old that child was. However, only children under the age of 18 or those in full-time education under the age of 25 are now exempt from tax on such payments. The Government took this step as there were concerns that the exemption was being abused by wealthy people passing on large gifts to adult children.

As a result of the clampdown, you could be liable for gift tax if you are over 25 and your parents pay for your honeymoon, foot your college bills, contribute towards a mortgage deposit, buy you a house or car, or allow you to live rent-free in the family's second home.

Despite the changes, you can still inherit up to €225,000 tax-free from your parents over your lifetime - and get €3,000 a year in gifts from each parent tax-free. Furthermore, you will not be hit for a tax bill if your parents pay for your wedding function because the Revenue Commissioners considers this an expense of your parents, rather than a gift for you.

Higher mortgage bills

Many people rushed to buy property in 2012 so they could snap up the outgoing tax break on mortgage interest - mortgage interest relief was pulled in 2013.

Those who grabbed the relief just before went will see a drop in the value of the tax break this year. A first-time buyer, for example, who took out a mortgage in late December 2012 would have qualified for 25pc tax relief on their mortgage interest (up to certain limits) for the last two years. However, that first-time buyer will only qualify for 22.5pc tax relief on their mortgage interest this year. This in turn will push up their mortgage bills from this month.

Sunday Indo Business