Back in April this year we heard from Minister Noonan that we can expect somewhere in the region of €1.5 billion extra in the 2016 Budget – which will make it the first positive Irish Budget for 8 years.
That figure of €1.5 billion was also repeated by Enda Kenny – although the Irish Fiscal Advisory Council have recently recommended an increase of just €700m.
What we expected
The €1.5 billion extra in Budget 2016 is going to be split equally between spending increases and tax cuts.
We are expecting changes to the PRSI system which should mean more take home pay for many people as well as cuts to the Universal Social Charge in the next Budget.
PRSI and USC contributions for low-paid workers are expected to be cut to coincide with the confirmation of an increase in the Minimum Wage from €8.65 to €9.15 an hour from January 1st 2016.
Under current PRSI and USC rules – the proposed minimum wage increase for someone working 39 hours a week would result in less take home pay because of PRSI, Income Tax and USC deductions.
Update – Budget 2016 Confirmed Changes Here
So it is likely that the USC bandings will be increased – for example , the €17,576 band will probably be increased to a level close to €18,576 so that people on the new higher minimum wage will not be hit with the 7% USC rate.
Enda Kenny has also promised to increase the total number of low-income workers that are exempt from USC to 500,000 in Budget 2016. So we expect the cut off point for USC to rise from the current €12012 to something like €13000
The USC rate of 7% is expected to be cut to 5.5% and the 3.5% rate will be cut to 3% while the lowest band of 1.5% will be cut to 1%
Enda Kenny has also given some vague promises to
” keep the burden of taxation on business and jobs low.” and to ” end the unfair tax treatment of the self-employed and small businesses”
Reduced childcare costs are also expected to be part of Budget 2016 – and one option being considered is an extension of the Early Childhood Care and Education (ECCE) Scheme.
Labour are keen to implement further improvements in Child Benefit, as well as other supports for families in part-time or full-time employment. We expect to see an increase of at least €5 per month on Child Allowance.
An increase to the Fuel Allowance of €2.50 a week from January 2016 is looking possible too. But increases to other welfare benefits such as jobseekers allowance are less likely . There have been reports (leaks) about a possible €3 a week increase to the State Pension.
An increase in the Christmas Bonus to at least 50% of the weekly rate is also expected. This is paid to most recipients of state pensions and social welfare payments.
Capital Acquisitions Tax (Inheritance Tax) cuts are likely – and there has been talk of a cut specifically aimed at inheritance of homes.
The Home Renovation Scheme is probably going to be extended for another year ( This scheme allows for an income tax credit on the VAT paid on work on renovating homes.)
Tobacco – it looks like a pack of 20 cigarettes will rise in price by 50c