Budget Rumours 2015 – What they mean for you (Part 4)

In our last look at proposed changes to the tax system before the budget next Tuesday, we’ll put the spotlight on the tax bands – ie. the income levels where the Government applies different rates of tax to your salary.

Tax Bands apply to Income Tax, USC and PRSI.

Marginal Income Tax Bands

At the moment, Ireland has one of the lowest entry points at which employees become subject to the higher rate of income tax. For a single person this entry point is €32,800, for a married couple with one income this raises to €41,800, and €65,600 for a married couple with two incomes.

At the moment the Entry Point to the Marginal Tax Rate looks like this before Tax Credits have been applied:

The proposed increase of €1,200 to the rate at which 41% tax is paid would see the entry-points go back to 2007 levels. This would raise the threshold for a single person to €34,000, €43,000 for a married couple with one income, and €68,000 for a married couple with two incomes.

The Increased Income Tax Bands would then look like this:

The annual saving from the increased bands is a significant €252 for a single person or single income married couple, and €504 for a dual income married couple.

Increasing the bands would also provide a small incentive to employees to take promotions which are now being turned-down due to the cross-over into a higher tax band.

USC Bands

We looked at USC rates in Part 1 of this series, where we examined what savings would be gained if the low, middle or high rates of USC were to be reduced by 1% in the budget next week.

Here’s a reminder of how USC looks at the moment:

Speculators trying to forecast moves in Budget 2015 have suggested the exemption for USC be increased from €10,036 to €15,000. Assuming the same structure as the current system, USC bands would look like this:

Using the income ranges from our previous examples, here is how Proposed USC Changes could affect you:

PRSI

Pay Related Social Insurance (PRSI) contributions help pay for Social Welfare benefits. Depending on your type of employment, you are assigned a PRSI class. Those in class A, which are most people in industrial, commercial or service employments, are subject to 4% PRSI charge on their full salary provided they earn over €352 per week. Current PRSI looks like this:

It has been proposed that the Government may decrease the PRSI rate by 0.5% to 3.5%. If this were to come about, the updated PRSI scheme would look like this:

As you can see from our pre-Budget 2015 blog series, the Government certainly have a number of opportunities available to them to ease the tax-burden on Irish workers and some huge decisions to make in relation to cost to the Exchequer.

The Finance Minister has the final say next Tuesday 14^th October and we’ll have a full breakdown of all the PAYE updates for you soon after. In the meantime, the only thing certain is, any relief given will be welcome relief!

To have our experts check your taxes for a refund before Budget Day, apply now.

Written by Alexandra Byrne.

I’m what you call an all-rounder! Having worked in customer services, accounting and now in marketing, I’m the one who can tie all the pieces of the puzzle together. I’ve a BSc from University of Limerick so I’m analytical, but I also love change! I’m constantly astounded by the lack of awareness we Irish have about our entitlements, and I like spreading the word about tax refunds – so as many people as possible can claim everything they are entitled to.