In an effort to ease the cost of living pressures brought about by rising prices and inflation the Minister for Finance announced a €1,500 increase in the standard rate band in addition to a €50 increase in the personal tax credit, employee tax credit and earned income tax credit. Additional measures announced include changes in USC to ensure the increased minimum wage remains outside the top rates of the charge and amendments to the operation of remote working relief for employees.
Credits and rate bands
The income tax standard rate bands will increase as follows:
- Single, widowed or surviving civil partner from €35,300 to €36,800;
- Single, widowed or surviving civil partners, qualifying for the Single Person Child Carer Credit from €39,300 to €40,800;
- Married couples or civil partners (one income) from €44,300 to €45,800;
- Married couples or civil partners (two incomes) from €44,300 to €45,800 (with an increase of €27,800 max)
The personal tax credit, the employee tax credit and the earned income tax credit will all increase from €1,650 to €1,700.
Marginal tax rate payers will receive an additional €415 in their take home pay, when USC changes (discussed below) are also considered.
Those earning below the standard rate band threshold have the opportunity to earn additional income without paying tax at the marginal rate.
The estimated cost of both measures is €597 million on a full year basis.
USC
To ensure that the salary of a full-time worker on the minimum wage will remain outside the 4.5 percent rate of USC when the minimum wage increases from €10.20 to €10.50 from 1 January 2022 the ceiling of the second USC rate band will increase from €20,687 to €21,295.
Workers with income above €21,295 will also benefit.
The USC Rates & Bands from 1 January 2022 will be:
- €0 – €12,012 @ 0.5% - no change
- €12,013 – €21,295 @ 2%
- €21,296 – €70,044 @ 4.5%
- €70,045+ @ 8%
- Self-employed income over €100,000: 3% surcharge
*Incomes of less than €13,000 are exempt from USC.
The estimated cost of these changes in USC is €26 million on a full year basis. The Minister also announced the extension of the reduced rate of USC for medical card holders by a further year, at an estimated cost of €62 million in 2022 and €72 million per annum thereafter. This measure is revenue neutral as it is already included in the tax base.
Working from home
Today the Minister for Finance announced that an income tax deduction amounting to 30 percent of the cost of vouched expenses for heat, electricity and broadband incurred while working from home will be available to employees. Remote working measures are to be formalised in legislation through the Finance Bill.
Results of a survey conducted by the Institute during 2021 indicated a strong desire for remote working to continue beyond the pandemic. Remote or hybrid working arrangements are expected to play a significant role in Irish employment, with 95 percent favouring remote working in a National Annual Remote Working Survey. However, as drawn out in the Next Financial Year it is necessary to ensure that undue financial hardship or administrative burdens must not be placed on employers. The CCAB-I called for the tax system in this area to be reformed given the array of health, social and commercial benefits.
The detail of the legislation contained within the Finance Bill will be eagerly anticipated by many. The anticipated annual cost of this measure is estimated at €11 million.
Aviation
Owing to the heavy price paid by international crews in the aviation sector during the pandemic, the Minister announced that the forthcoming Finance Bill is to amend the tax arrangements applying under section 127B TCA 1997, to exclude non-resident air crew where certain conditions are satisfied.
Sea-going naval personnel tax credit
The sea-going naval personnel tax credit will be extended to 31 December 2022.
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