Income tax cut off point increased to €40,000

October 6, 2022
|In Business, Lifestyle, VAT
|By Angela O'Leary
Minister for Finance Paschal Donohoe has announced an income tax package to the value of over €1.1 billion.
The standard rate cut off point will be increased by €3,200 to €40,000, with proportionate increases for married couples and civil partners.
The Irish Tax Institute said this change, along with the cost of living package of measures will help this group of taxpayers in the current inflationary environment.
“The decision to raise the entry point to the higher rate of income tax rewards middle-income earners who have shouldered more than their fair share of the burden of our highly progressive tax system over recent years,” said Colm Browne, President of the Irish Tax Institute.
However, Marian Ryan, Consumer Tax Manager at Taxback.com said the move doesn’t go far enough.
“We believe the Government should have increased the level at which people hit the higher rate of income tax to €50,000 – as this would have made a huge difference to all those battling with rising living costs,” she said,
“Instead, taxpayers will go onto the higher rate of income tax once they earn €40,000 – which is still well below the average Irish wage of €45,324,” she added.
The main tax credits, including Personal, Employee and Earned Income Credit, will also increase by €75.
Minister Donohoe said the Home Carer Tax Credit will increase by €100, to support stay at home parents.
In his Budget speech, Minister Donohoe said, “There are so many people who work hard, but whose earnings push them outside of access to social welfare benefits. We need to help them too, we need to put money back into their pockets.”
The Minister announced the increase of the second USC rate band (2% rate) from €21,295 to €22,920 in line with the 80% per hour increase in the national minimum wage recently agreed by this Government.
“The increase in the USC band will ensure that full-time workers on the minimum wage will remain outside the top rates of USC, while also giving a modest benefit to all workers whose income is above that amount,” he said.
A third rate of income tax is not being introduced in Budget 2023.
 
The Minister said further analysis of the Tax Strategy Group would give options to Government on additional policy levers in future budgets to make our income tax system more balanced and effective.
Minister Donohoe said this analysis will assist government in arriving at an informed decision in a timely manner.
He said were the Government to opt for the introduction of a third rate of income tax, it would require considerable change to the systems in both the Revenue Commissioners and payroll providers; changes that will need significant lead-time to implement.
“We are advised that this could be done for January 2024,” the Minister told the Dáil.
He said the Department of Finance will engage with the Revenue Commissioners on the necessary preparatory work, in advance of a policy decision being made by Government.
The Residential Development Stamp Duty Refund Scheme is to be extended to the end of 2025, the Minister for Finance has announced in today’s budget.
Under the scheme, which has bene in place since 2017, a portion of the stamp duty paid on the acquisition of non-residential land is refunded when the land is subsequently developed for residential purposes.
The net minimum stamp duty payable after a refund is 2%.
The normal rate for non-residential property is 7.5%.
“To the end of 2021, this scheme had been availed of in respect of projects that have delivered over 15,000 residential units,” Minister Donohoe explained.
 
A vacant homes tax has been announced which will apply at a rate of three times the local property tax rate that applies to the dwelling.
The tax will apply to residential properties which are occupied for less than 30 days in a twelve month period.
“There will be a number of exemptions to ensure that owners are not unfairly charged where the property may be vacant for a genuine reason,” Paschal Donohoe said in his speech.
The tax will operate on a self-assessment basis and will be administered by the Revenue Commissioners.
“Maximising the use of existing housing stock is also a key objective of this Government,” Minister Donohoe said.
The Minister also announced the removal of VAT on life-saving defibrillators from January 1.
A zero rate of VAT will be applied to hormone replacement and nicotine replacement therapies, as well as the small number of period products that are currently subject to a 9%cent rate.
 
Labour Finance spokesperson Ged Nash has described tax cuts announced in today’s Budget as “really inequitable and “favouring those with the most.”
Mr Nash told RTE’s News at One that those who need the most support from the state did not get it.
“This looks like a big ball of money that Government is about to spend in once off measures but that doesn’t take the bare look off Budget 2023.
“When the dust settles what we’re really dealing with here is a €12 below inflation increase in social welfare weekly rates. That’s way behind the rate of inflation.
“It doesn’t keep up with the rising cost of practically everything.
“This is a case of business as usual once we disregard the once off payments that will be made over the next few weeks.”