In an effort to ease the ongoing cost of living pressures brought about by increased prices and inflation, the Minister for Finance announced a €2,000 increase in the standard rate band, in addition to a €100 increase in the personal tax credit, employee tax credit and earned income tax credit. The home carer tax credit and single person child carer tax credit will each increase by €100, and the incapacitated child tax credit will increase by €200.
The middle rate of USC will be reduced from 4.5 percent to 4 percent. Additional measures announced also included changes in the USC to ensure the increased minimum wage remains outside the top rates of the charge.
The average worker can expect to pay around €800 less in income taxes.
Credits and rate bands changes from 1 January 2024
The income tax standard rate bands will increase as follows:
- Single, widowed or surviving civil partner from €40,000 to €42,000;
- Single, widowed or surviving civil partners, qualifying for the Single Person Child Carer Credit from €44,000 to €46,000;
- Married couples or civil partners (one income) from €49,000 to €51,000;
- Married couples or civil partners (two incomes) from €49,000 to €51,000 (with a maximum increase of €33,000).
The personal tax credit, employee tax credit and earned income tax credit will all increase from €1,775 to €1,875. The home carer tax credit will increase from €1,700 to €1,800, while the single person child carer credit will increase from €1,650 to €1,750. The incapacitated child tax credit will increase by €200 from €3,300 to €3,500.
For example, a single person earning €45,000 will receive at least an additional €767 in their take home pay, when the 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 these measures is €1.135 billion on a full year basis.
USC
To ensure that the salary of a full-time worker on the minimum wage will remain outside the new 4 percent rate of USC when the minimum wage increases from €11.30 to €12.70 from 1 January 2024, the ceiling of the 2 percent USC rate band will increase by €2,840 from €22,920 to €25,760. The 4.5 percent rate will reduce to 4 percent.
As a result, the USC rates and bands from 1 January 2024 will be:
- €0 – €12,012 - 0.5% - no change;
- €12,013 – €25,760 - 2%;
- €25,761 – €70,044 - 4%
- €70,045+ - 8%; and
- Self-employed income over €100,000 - 3% surcharge.
Incomes of less than €13,000 are exempt from USC.
The Minister also announced the extension of the reduced rate of USC for medical card holders to 31 December 2025.
The estimated cost of these changes in USC is €350 million in 2024 and €400 million per annum thereafter.
Benefit-in-Kind on Motor Vehicles
The temporary relief of €10,000 on the Original Market Value of vehicles (and vans) in Categories A to D has been extended to 31 December 2024. The amendment lowering the limit of the highest mileage has also been extended to 31 December 2024.
Sea-going naval personnel tax credit
The sea-going naval personnel tax credit will be extended to 31 December 2024. It applies where a permanent member of the Irish Naval Service spends at least 80 days at sea on board a naval vessel in the previous tax year. In such circumstances, he/she is entitled to a tax credit of €1,500. The cost of the extension of the credit is estimated to be €500,000.
PRSI
From 1 October next year all PRSI contribution rates will increase by 0.1 percent.
Donations of heritage items
This tax relief is available to taxpayers who donate heritage items to Irish national collections. A credit equal to 80 percent of the market value of the item donated can be set against donors’ liabilities for income tax, corporation tax, capital gains tax or gift and inheritance tax.
Currently, the aggregate value of items that can be donated under the scheme in any one year cannot exceed €6 million; this limit is to be increased to €8 million.
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