Budget 2019 Families: A little bit for everybody in the audience

A pre-election budget it very well may have been, but a giveaway budget it was not, with everyone gaining a little, and no-one gaining a lot.

Yes, a number of tax changes, including a widening of the standard rate band and a reduction in the rate of universal social charge levied, means that all our budget families will pay less tax next year. However, as our tables show, they will still pay significantly more tax in 2019 than they did back in 2008.

Families with a stay-at-home parent were one of the big winners in the budget, thanks to the €300 increase in the homecarer’s tax credit. It means for example, that our single income couple, Fred and Ellen, will have an extra €540 in their back pocket next year.

Other gainers include our self-employed couple Mark and Linda, who will also benefit from a €200 increase in the earned income credit on self-employed income. It means that their savings will also be north of €500 next year.

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Pensioners too will be up, on the back of a €5 increase in their state pension from March next year, as well as the return of the full Christmas bonus.

For single parents, the tax benefits may not have been great; our single parent Amie for example, will see her monthly income increase by just €3. However, the budget did announce a number of other measures which might help. These include an increase in the back to school clothing and footwear allowance and an increase of qualified child increase (QCI) payments.

Gains for low income workers will also be modest, while many might rue the fact that no relief was offered for renters, who continue to struggle with very high rents.

Our landlords on the other hand, civil partners David and Brian, will be able to claim 100 per cent on mortgage interest paid on their two Dublin rental properties. However, with many landlords paying interest on a tracker mortgage at a rate of just 0.5 per cent, the reduction in tax may not be significant to them.

Putative home buyers, such as our public sector worker Tom, might also be disappointed that the Government did not signal what it plans to do with the first time buyer’s incentive, the Help to Buy scheme. The scheme, which offers tax back of as much as €20,000 towards a deposit on a new home, is due to run out at the end of 2019, and the Government gave no clue as to whether or not it will extend it.

Low income worker: Rebecca €22,000

Rebecca is a 24-year old hairdresser from Kildare. She works full-time and moved out of her family home in 2018 to rent a one bedroom apartment. Her annual earnings are € 22,000 a year.

Rebecca is very disappointed that despite the USC changes, given her level of income she doesn’t get any benefit from the increase in the standard rate tax band, and as such, her net monthly income is only very slightly increased from €1,641 in 2018 to €1,643 in 2019 and still not back to what it would have been in 2008 (€1,720), had she earned the same level of income at that time. She is also disappointed that nothing has been done in the Budget to combat rising rents. She does not believe that her landlord would pass on to her any savings made due to the increase in mortgage interest relief for rental properties.

Rebecca is concerned that the increase in VAT may negatively impact the hairdressing business where she works.

Single public sector worker: Tom €35,000

Tom is a single 27-year old who lives and works in north county Dublin, where he is a primary school teacher. Tom earns € 35,000 a year.

He is paying € 800 for a two-bed apartment that he shares with a friend. However, he would like to get on the property ladder in the near future and hopes to use the Help to Buy scheme to help them get his deposit together. He is relieved to see no negative changes to this scheme were highlighted in Budget 2019 and he is keen to learn more about how it may help him in purchasing his own home. He wonders if the housing measures announced for 2019 may have an impact on the market.

Tom is glad that the increase in the standard rate band will mean that he won’t pay any tax at the 40 per cent rate in 2019. However, at his level of income, as a result of the Budget he will be better off by just € 12 per month. Tom despairs however at yet another increase in the price of cigarettes and that no measure of tax relief was introduced for those renting accommodation.

Single parent: Amie €30,000

Amie is a single mother in her late thirties. She lives in Galway with her son Eoin, aged four. Amie works as laboratory supervisor and earns € 30,000 per year.

Amie would have liked to have seen an increase to the single person child carer credit that was introduced in 2014, but unfortunately this has not come through in the budget. She is surprised that child benefit payment has not been increased in line with the uplift to weekly social welfare payments.

She doesn’t fully understand if she would be entitled to avail of the affordable childcare scheme and is going to look into this further.

Amie will not feel any benefit in cash terms as a result of the budget, as she has gained just € 3 per month. Looking back over her payslips, Amie notes that there is still a significant difference in her monthly net income in 2008 of € 2,330 to € 2,256 in 2019.

Dual income family: Mark & Linda €175,000

Mark is married, in his early 50s, and lives in Louth with his wife Linda. Mark is a self-employed hotelier. Linda has a part-time job as a beautician and earns a salary of € 23,000.

They have four children, one of whom still lives at home. Mark’s annual income over the last number of years was € 152,000.

Mark and Linda are worried about what Brexit might mean for the hotel they own in Co. Louth. In addition to the worries that Mark has in relation to Brexit, he is very concerned about the effect the increase in the VAT rate will have on his business. He is also concerned at the increase in the National Training Fund levy (notwithstanding the Minister had signalled the increase last year) which will mean paying PRSI contributions on behalf of the majority of his employees at 10.95 per cent in 2019. The increase in the minimum wage rate may also impact his costs of employing staff.

Mark is happy about the increase in the earned income tax credit, but bitterly disappointed that the 3 per cent USC surcharge for self employed individuals with income over €100,000 remains in place. Mark and Linda’s net monthly income for 2019 will be € 8,901 after the deduction of taxes, PRSI and levies. When looking back on their tax assessments for 2018, his net monthly income for 2018 was € 8,858, therefore representing an increase in net monthly income of € 43.

Civil partners: David & Brian €90,000

David and Brian have been living as a couple for over ten years and live in a three bed house in Co. Westmeath with their baby. Brian works as a manager in a tech company earning € 54,000. David does not work outside the family home but manages the two rental apartments they jointly own in Ranelagh, which each generate € 1,500 in net rental income per month. The cost of childcare is putting David off going back to work.

Brian commutes from Athlone to Dublin City Centre for work each day so is relieved that despite the speculation there is no increase in the cost of diesel. They are disappointed that this budget provides very limited relief for landlords as the increase in mortgage interest relief won’t really help in their circumstances.

Brian and David have looked at the impact successive budgets have had on their income. Their accountant has given him an estimate of their likely liability for 2018, which will show net monthly income for the year of €5,392 after the deduction of taxes, PRSI and levies. On the same level of income for 2019 this will be €5,417. Their 2008 tax assessment shows their net monthly income for 2008 was €5,702, representing a net monthly income drop of €286 between 2008 and 2019.

Pensioners: Leslie and Kitty €48,000

Leslie and Kitty are married and living in Cork. They own their family home having paid off their mortgage. Leslie and Kitty are in their late 70s. Leslie receives an occupational pension of € 22,000 along with the state contributory pension and deposit interest. Kitty also receives the state contributory pension.

With their children in mind, they are pleased to see an increase in the band for gift/inheritance tax from € 310,000 to € 320,000 in the budget. They are also happy to see that their state pensions will increase by € 5 each per week in 2019, and that the Christmas bonus has been fully reinstated to 100 per cent.

All in all, Leslie and Kitty are indifferent to the budget changes as they will be better off by only € 7 per month. Back in 2008, if the couple had had the same level of income their net income would have been € 3,864, while in 2019 their total net monthly income is € 3,765, a relative net monthly decrease of € 99.

Single-income family: Fred & Ellen €57,500

Fred and Ellen are in their mid-thirties. They live in Kilkenny in a four-bed semi-detached house. They have two children aged 10 and four. Fred gave up his job 10 years ago when their son was born so he could mind the baby and hasn’t gone back to work. Ellen returned to work full-time in a tech company. Her annual income is € 47,500.

They have boosted their income by € 10,000 a year thanks to the rent-a-room scheme. This is within the current tax-free limits so they receive this amount, tax free on top of Ellen’s salary.

They are relieved that no changes have been made to the rent-a-room scheme as this would impact their tax free income. They are also looking into reliefs available for childcare as previously it made no sense financially for Fred to be working with the cost of childcare.

Fred did a comparison of what their net monthly income was in 2008 (including the rent-a-room scheme income to compare like with like). Their net monthly income in 2019 is € 4,205 as opposed to € 4,263 in 2008 , or € 58 less. However, the increases in tax credits and USC changes mean that, comparing 2018 and 2019, Fred and Ellen are better off in 2019 by € 45 per month.

High earning couple: Frank & Alison €250,000

Frank and Alison are in their early forties with two children in primary school. They live in a € 1.5 million four-bed detached house they own in Dun Laoghaire, south Dublin. Both Frank and Alison are accountants and earn a combined annual salary of € 250,000.

Frank was concerned about any changes to the local property tax given the value of their home. He notes that the Minister has committed to any future changes in the tax being moderate and affordable. The couple were also worried about the talk of a third tax rate being introduced and are glad that this hasn’t happened.

While disappointed that there was no increase in child benefit, the Budget will see their monthly income increase nonetheless, up from € 12,200 in 2018 to € 12,248 in 2019, or by €48 a month.