Analysis: income tax changes announced in Budget 2024 are now taking effect so here’s how they wlll impact your pay
By Natasha Caulfield, University of Galway
The Government’s budget day brings much anticipation, weeks of speculation, and expert debates. With each year, there is criticism and praise for measures and changes that are announced – and Budget 2024 was no different. That budget was introduced on October 10th last and the multiple tax measures which were announced then will have an impact on your take-home pay as we enter 2024.
The main changes which will affect the average worker are as follows:
- An increase of €2,000 in the income tax standard rate cut-off point for all earners
- €100 increase in the Personal Tax Credit
- €100 increase in the PAYE Tax Credit
- A reduction in the middle rate of Universal Social Charge (USC) from 4.5% to 4.0%
- An increase of €2,840 in the threshold at which the middle rate of USC is paid, from €22,920 to €25,760
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From RTÉ News, Budget 2024 tax changes to come into effect
As there was an increase of €2,000 announced for the income tax standard rate cut-off point for all earners, the amount of gross income taxed at the higher tax rate of 40% has reduced. In 2023, €5,000 of this employee’s salary would be taxed at 40%, however this has reduced to €3,000 for 2024.
Both the Personal Tax Credit and the PAYE Tax Credit have increased by €100 to €1,875 each. Tax credits reduce our tax liability. There has been some changes to PRSI rates for 2024. A detailed guide of the PRSI changes for 2024 is available here. Increases in Incapacitated Child Tax Credit, Single Person Child Carer Credit, Earned Income Credit and Home Carer Tax Credit were also announced.
According to the salary guide published by Morgan McKinley, the average salary in Ireland is approximately €45,000 so the various tax changes means the average worker will have an additional €722 per annum in their take-home pay.
Please note that the figures in this example are rounded to the nearest euro. You may be able to avail of additional tax credits and reliefs which have not been considered in the above illustration.
A number of changes have been made to USC rates and bands. In 2023, the first €12,012 of an employee’s salary would be taxed at 0.5% and this remains unchanged for 2024. The portion of an employee’s salary from €12,012 to €25,760 will be taxed at 2%, while the balance above €25,760 will be taxed at a rate of 4% in 2024. In comparison, in 2023, the balance above €22,920 would have been taxed at a rate of 4.5%.
The USC is often a controversial topic leading up to Budget Day. It was originally thought that the ‘charge’ was temporary when first announced by the late Brian Lenihan Jr in 2010. In 2016, Leo Varadkar tweeted that USC would be abolished “over the lifetime of the next Government”. However, USC remains in place for workers in Ireland.
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From RTÉ Radio 1’s Today With Claire Byrne, is the ‘dreaded’ USC tax here to stay?
A number of once-off cost of living supports were announced, including:
- €450 electricity credits, which will be given in three instalments of €150. It was planned that first instalments would be issued in December 2023, followed by a second instalment in January 2024, with the third and final payment in March 2024. These payments occur automatically and therefore there is no need to apply for them.
- Once-off payments relating to Child Benefit and Working Family Payments were made in November & December 2023.
A number of expenditure measures will provide benefit to qualifying persons during 2024:
- Free School Book Scheme for junior cycle students at post-primary level
- Restoration of maintenance grants to postgraduate students on a similar basis to undergraduates
- 20% fare reduction on public transport continued to the end of 2024
- €12 increase in the weekly social welfare rate for working age recipients
- €12 increase in weekly payments for pensioners
- €54 per week increase in the Working Family Payment threshold
- €4 increase in weekly rate for a qualified child
- National Childcare Scheme hourly subsidy increased from €1.40 to €2.14 from September 2024
- Extension of Child Benefit to 18 year olds in full time education
- The Help to Buy Scheme for first-time property purchasers is extended until December 31st 2025
Natasha Caulfield is a lecturer in Accountancy & Finance in the J.E. Cairnes School of Business and Economics at University of Galway.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ