In an effort to ease the cost-of-living pressures brought about by rising prices and inflation, the Minister for Finance announced a €3,200 increase in the standard rate band, in addition to a €75 increase in the personal tax credit, employee tax credit and earned income tax credit. The home carer tax credit has been increased by €100. Additional measures announced include changes in the USC to ensure the increased minimum wage remains outside the top rates of the charge and an increase in the small benefit exemption for employees.

Credits and rate bands

The income tax standard rate bands will increase as follows:

• Single, widowed or surviving civil partner from €36,800 to €40,000;
• Single, widowed or surviving civil partners, qualifying for the Single Person Child Carer Credit from €40,800 to €44,000;
• Married couples or civil partners (one income) from €45,800 to €49,000;
• Married couples or civil partners (two incomes) from €45,800 to €49,000 (with an increase of €31,000 max)

The personal tax credit, the employee tax credit and the earned income tax credit will all increase from €1,700 to €1,775. The home carer tax credit will increase from €1,600 to €1,700.

Marginal tax rate payers will receive an additional € 830 in their take home pay, when USC changes are factored in (discussed below), while those earning below the standard rate band threshold will have the opportunity to earn additional income without paying tax at the marginal rate.

The estimated cost of these measures is €1.226 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 4.5 percent rate of USC when the minimum wage increases from €10.50 to €11.30 from 1 January 2023 the ceiling of the second USC rate band will increase from €21,295 to €22,920.

Workers with income above €22,920 will also benefit.

The USC Rates & Bands from 1 January 2023 will be:

• €0 – €12,012 @ 0.5% - no change
• €12,013 – €22,920 @ 2%
• €22,921 – €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 €67 million in 2023 and €77 million per annum thereafter.

The Minister also announced the extension of the reduced rate of USC for medical card holders by a further year. This measure is revenue neutral as it is already included in the tax base.

Small Benefit Exemption

Today the Minister for Finance announced changes to the Small Benefit Exemption, permitting two vouchers to be granted by an employer in a single year and increasing the annual limit per employee from €500 to €1,000 per annum. These changes will apply for 2022 and subsequent years.

Sea-going naval personnel tax credit

The sea-going naval personnel tax credit entitles certain individuals to a tax credit of €1,500. The Minister announced the extension of the credit to 31 December 2023. The credit is available to permanent members of the Irish Naval Service who spent at least 80 days at sea on board a naval vessel in the previous tax year. The cost of the extension of the credit is estimated to be €500,000.

Foreign Earnings Deduction

The Foreign Earnings Deduction (FED) will be extended to 31 December 2025. It provides relief from income tax on up to €35,000 of income for employees tax-resident in Ireland who travel out of the State to temporarily carry out duties of employment in certain qualifying countries.

Compliance

Revenue will conduct a range of targeted projects which will include PAYE compliance interventions involving a further focus on share schemes, and increased debt management activity. It is expected that these projects will yield additional Exchequer receipts of €80 million arising from increased taxpayer compliance.