Budget 2021: A Summary

The 2021 Budget was announced at 1pm Tuesday 13th October 2020. A summary of the main items that will directly affect people’s income or outgoings is given below .

Updated October 16th 9 am


Summary of Budget 2021

Income Tax

No changes to income tax bands or rates in Budget 2021.
Earned Income Tax Credit increased by €150 to €1,650.

USC

The USC 4,5% threshold is to be increased in Jan 2021 from €20,484 to €20,687 This is to coincide with the minimum wage increase to €10.20 an hour. This change will prevent minimum wage earners from falling into this higher USC brcket. It will also result in a reduction in USC of €5 a year for everyone else earning over the minimum wage full time equivalent.

Help To Buy Scheme

The enhanced scheme is extended until the end of 2021.


Motor Tax

From Jan 2021 there will be a new set of Motor Tax rates for cars registered from the 1st of January 2021. These will take account of the introduction of the WLTP emissions test. (Worldwide Harmonised Light Vehicle Test Procedure ). Details soon.

There will be some increased rates for cars taxed on CO2 emissions (cars first registered in the State between July 2008 and end 2020).
From Jan 2021 five of the tax bands will be increased.
The €390 rate will rise to €400.
€570 rate will increase to €600.
The rate of €750 will rise to €790 and €1200 will become €1250.
The maximum rate for cars taxed on CO2 emissions (first registered State between July 2008 and end 2020) will rise from €2350 to €2400

There are no changes to the motor tax rates for cars taxed based on engine size (pre July 2008).


Carbon Tax

An increase of €7.50 a tonne from €26 to €33.50 a tonne was confirmed. (This will continue to move towards €100 per tonne in 2030. )
This increase will apply to auto fuels from midnight 13th Oct .
The increase will mean a €0.025 increase in the cost of a litre of diesel and €0.021 on a litre of petrol.
The increase will be applied to all other carbon-based fuels (coal , peat, kerosene,gas) from May 1st 2021. More on Carbon Tax 2020/2021

PRSI

Employers PRSI increased threshold from €394 to €398 .


Vehicle Registration Tax

The number of bands will rise from 11 at present to 20, applying to all new car sales from January 1st. Lower rates for lower emissions. The lowest VRT rate will drop from 14% to 7%. The top VRT rate will rise from 35% to 37%.

The VRT relief for hybrid (and plug-in hybrid) vehicles will expire on 31 December 2020

The €5,000 VRT relief for Battery Electric vehicles will be kept in full for vehicles with an Opem Market Selling Price below €40,000. Above €40,000, the relief will be reduced and there will be no relief for vehicles with an open market selling price over €50,000.

The charging structure for the NOx surcharge is also adjusted so that 1-40 mg are charged at €5 per mg, and 41-80 mg are charged at €15 per mg.

VAT


VAT rate for the tourism and hospitality sector will be reduced from 13.5 per cent to 9 per cent with effect from November 1st. The reduced rate will be in place until December 2021. VAT RATES 2020

Duty on Alcohol and Tobacco

The cost of a packet of cigarettes will rise to €14, with excise duty going up by 50 cents. Midnight 13th Oct
Alcohol – no change.


Pensions and Welfare Benefits

Fuel Allowance to increase by €3.50 a week to €28 a week from January 4th 2021

Living Alone Allowance increased by €5 a week to €19 from Jan 1st 2021

Carer’s Support Allowance increased by €150 a year (paid in June)

Dependent Child component of welfare benefits to increase. The Qualified Child Payment will be increased by €5 for over-12s and €2 for under-12s.
Consequently, the weekly payment for a qualified child aged 12 or over will increase from €40 to €45, while the payment for a child aged under 12 will increase from €36 to €38. All from Jan 1st 2021.

Working Family Payment income threshold increase by €10 a week for families with up to 3 children. No date was given.

One-Parent Family Payment Earnings threshold of €425 to be removed from April 2021. This means that working lone parents will no longer lose their One-Parent Family Payment when their employment income exceeds the current €425 limit.

Illness Benefit – the waiting period is reduced from six to three days so that people can be paid from their fourth day of illness. (From end of Feb 2021)

Disability Allowance – the earnings disregard is increasing from €120 per week to €140 per week with effect from June 2021.

Extension of Parent’s Leave and Benefit – by 3 weeks. It will be increased from 2 weeks to 5 weeks from April and it will apply in relation to all children born since November 2019. This payment is available to both parents.

Widowed or Surviving Civil Partner Grant – increased from €6,000 to €8,000.

Pandemic Unemployment Payment (PUP) . Self-employed people on PUP can recommence work and earn up to €480 per month while retaining their full PUP entitlement. This change seems to be effective as of Oct 14th.

There will be a Christmas Bonus this year and it will also be paid to short term unemployed including most people on the Pandemic Unemployment Payment.


Students

There will be a new fund to provide one-off financial assistance to most full-time third level students, likely to be worth €250 to each student. This is to help with the move towards greater online learning. It will be provided to students who have paid the €3,000 student registration fee or who are in receipt of Susi grants. Apparently it will be paid automatically, there is no application process. No date has yet been given for when the payment will be made.

The income thresholds for the Student Grant Scheme will increase. (Details to follow)

In addition, post-graduate fee grants will increase – with maximum payments rising from €2,000 to €3,500. The income threshold for eligibility for these grants will also rise, up from €31,500, now €54,240.


Previous Budgets

Budget 2020

Budget 2019

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10 thoughts on “Budget 2021: A Summary

  1. ” VRT relief for hybrid (and plug-in hybrid) vehicles will expire on 31 December 2020”

    Does this apply to imports of pre-owned hybrid (and plug-in hybrid) Vehicles ?

  2. ‘Pandemic Unemployment Payment (PUP) . Self-employed people on PUP can recommence work and earn up to €480 per month while retaining their full PUP entitlement.’

    When does this begin?
    Is there a particular start date for it?

  3. Here’s my thoughts on Budget 2021:

    The Budget increased income thresholds for the Student Grant Scheme without doing anything to reduce the time you need to be several months on social welfare beforehand. This makes the Scheme extremely cumbersome and closed to many applicants. I can’t see how increasing the thresholds will do anything given that most incomes have been reduced during the past 12 months anyway.

  4. I laughed how the Third level system still references the ‘Free fees’ line. At present, we have the highest Third-level fees in the EU.

    The Budget Re-skilling initiatives are pointless in my opinion. As I understand, many people in their 30’s or 40’s usually don’t go back to third level upon completion of their first degree in their 20’s.

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