Announcing an income tax package to the value of almost €520m in today’s Budget, Minister for Finance Paschal Donohoe said the Government wants to ease the cost of living pressures which many are feeling.
Changes see the standard rate band increase by €1,500 while the personal tax credit, employee tax credit and earned income credits will also rise by €50.
He said these changes will benefit anyone who pays income tax.
The Finance Minister also said the Government had accepted the recommendation of the Low Pay Commission to increase the national minimum wage by 30 cent to €10.50 an hour.
In order to ensure that the salary of a full-time worker on the minimum wage will remain outside the top rates of the Universal Social Charge, he also said the ceiling of the second USC rate band will be increased from €20,687 to €21,295.
He said this move will benefit workers whose income is above that amount.
Meanwhile, the exemption from the top rate of USC for all medical card holders and those over-70 earning less than €60,000 is also being retained.
Marian Ryan, Consumer Tax Manager at Taxback.com, said while the €50 increase in tax credits, and €1,500 increase in the standard tax band is welcome, it will do little to impact the cost of living.
“Today’s announcement of the €1,500 increase of the standard rate band to €36,800 should come as good news to those paying the higher rate of tax with high earners likely to see an increase in net pay of approximately €420, but unfortunately it will do little to help those who are most likely to be unable to absorb annual consumer price increases – ie lower income earners,” she said.
“However the increase of €50 to both the PAYE and Personal Tax Credits will be welcomed along with the increase of €608 of the second USC band will result in additional income of approximately €115 per year for the lower income earners,” she added.
Ms Ryan said the Government needs to make sure this news is communicated clearly to those who will be impacted by the changes.
“I say this because we took a survey of over 2,200 taxpayers in the run up to the budget in which four in ten people said they did not understand tax indexation measures like those announced today, and would really like to see those in power speak in more simplified lay mans terms so people can really understand what Budget 2022 will mean for their household,” she said.