The standard-rate cut-off point for income tax by €2,000 to €44,000 and reduce the 4 per cent Universal Social Charge (USC) rate to 3 per cent on incomes between €25,760 and €70,044, Minister for Finance Jack Chambers has confirmed.
The changes, announced by the Fianna Fáil TD in the Dáil chamber on Tuesday afternoon, form part of an overall €1.4 billion tax package set out by the Coalition Government in Budget 2025.
Delivering his budget address this afternoon, Mr Chambers said the entry level to the new 3 per cent USC rate will increase by €1,622 to €27,382 to take into account an 80 cent increase in the national minimum wage next year. The rate was reduced from 5 per cent to 4 per cent in last year’s budget, which was the first time in five years in which the rate was cut.
The Government will also increase the Personal, Employee and Earned Income Credits, by €125, Mr Chambers said.
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Meanwhile, the Home Carer and Single Person Child Carer Tax Credits will increase by €150 while the Dependent Relative Credit will increase by €60.
The Coalition also agreed to increase the threshold for entrance into the higher rate of income tax from €42,000 to €44,000, a move that will save each individual around €400, assuming they are fully utilising the tax band, said Mary Moran, tax director at Grant Thornton.
Ms Moran said the reduction in the 3 per cent USC rate coupled with €125 increase in the main annual tax credits, “means that the average middle-income family – the JAM (just about managing) families with two incomes totalling €90,000 will be circa €1,627 better off per annum”.
However, she said the increase in Pay Related Social Insurance (PRSI) introduced in last year’s budget will “reduce the positive impact of the above by approximately €90″ annually.
Trade unions, meanwhile, have labelled the tax policy changes as fiscally irresponsible. A spokesman for the Irish Congress of Trade Unions said Budget 2025 said the “swathe of regressive tax cuts” unveiled on Tuesday are “deeply unwelcome and highly questionable”.
“The Government’s budget will hollow out the tax base just as we are facing into the challenges of slowing growth, climate change, an ageing population, digitalisation, and a reversal of globalisation,” he said.
Siptu, meanwhile, has labelled the income tax cuts as an “irresponsible attempt” by the Coalition to “buy an election”. Joe Cunningham, the trade union’s general secretary, said the changes are “fiscally irresponsible” and represent a return to “pre-crash giveaway budgets”.
“Today’s measures will hollow out our tax base at a time of slowing growth,” he said. “Tax cuts today will mean larger tax increases in the future as growth slows to 1 per capita in the years ahead.”
