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Personal Finance

Here’s everything you need to know about Budget 2020

Daragh Cassidy

Daragh Cassidy

Head Writer

Caution was the word of the day as Budget 2020 was delivered against the looming threat of a no-deal Brexit.

After the spendthrift budgets of the past few years, Budget 2020 was a much more cautious affair with the need for financial prudence high on the Government's agenda due to the very real threat of a no-deal Brexit.  

But that didn't mean there wasn't money to be given away. In fact the Government announced a spending package of around €3.1 billion in total, although much of this had been previously committed.

From an increase in the carbon tax to a reduction in prescription charges, there was a lot to take in. Here we take a look at the main announcements and what it all means for your pocket. 

With the threat of a no-deal Brexit ever present, a whole host of Brexit support measures for the economy were announced.

In total, a package of more than €1.2 billion, excluding EU funding, will be made available. €200 million will be invested next year no matter what happens regarding Brexit to increase staff and improve customs and technology facilities at ports and airports.

If there is no deal, then €650 million will be made available to support the agriculture, enterprise and tourism sectors and to assist the most affected citizens and regions. Over €365m will also be set aside for unemployment benefits while a further €45m will be made available to assist jobseekers in case unemployment rises in the event of the UK crashing out of the EU.

Supports will also be made available to the food, manufacturing and services sector.

As expected Budget 2020 saw no major changes to taxation, meaning most of us will see no increase in our take home pay.  

  • USC, income tax and PRSI rates will all remain the same.
  • The point at which people hit the higher 40% rate of income tax will remain at €35,300 for a single person and €44,250 for married one-earner couples. This means the threshold remains well below the €50,000 pledged by Leo Varadker at the Fine Gael ardfheis last year.
  • The PAYE/Employee Tax Credit and the Single Person Tax Credit will both remain at €1,650 i.e. €3,300 in total. This means the level at which most employees begin to pay 20% income tax remains at €16,500 as per the last few years. 
  • However the Earned Income Tax Credit for the self-employed will increase by another €150 to €1,500.
  • The Home Carer Tax Credit will rise by €100 to €1,600.

Although taxes at least didn't rise, with wages increasing at a rate of around 2 to 3% a year, the failure to increase tax credits or tax bands in line with wage inflation means most people will end up paying a higher percentage of their income in tax next year.

Thanks Brexit! 

USC bands 2020

Rate

First €12,012

0.5%

€12,012 to €19,874

2%

€19,874 to €70,044 

4.50%

Balance

8.00%

Tax bands 2020

20%

40%

Single

€35,300

Balance

Married (one earner)

€44,300

Balance

Single parent family

€39,300

Balance



Housing was unsurprisingly a big focus of the budget again this year. The main announcements were: 

  • The allocation of €2.50 billion to the housing programme in 2020, of which €1.10bn will be made available to deliver 11,000 new social homes.
  • No changes to the Help-to-Buy scheme for first-time buyers, which will be extended for a further two years until the end of 2021.
  • There will be an extra €80 million for the Housing Assistance Payment (HAP) scheme in 2020 to provide support for around 15,000 new tenancies.
  • €20 million extra is being provided next year for homelessness services, bringing the total allocation for such supports to €166 million in 2020.
  • A €2 million increase in funding for the Residential Tenancies Board to support more local authority inspections and compliance in the private rental sector.

It hasn't been a good budget for smokers (is it ever?)

The excise on cigarettes has gone up by 50 cent, bringing the price of a pack of 20 cigarettes up to around €13.50. However excise duty on alcohol and petrol and diesel has remained unchanged once again this year but changes to the carbon tax (more on that below) mean motorists will still be hit. 

Also, a new tax based on a vehicle’s nitrogen oxide (NOx) emissions will be applied to new cars and used imports from 1st January, replacing the current 1% diesel surcharge. For the best-selling current new diesel models, the average charge under the new NOx tax will be broadly similar to the cost of the outgoing levy, meaning no real impact on consumers' pockets. However new petrol and hybrid-engined models will see a slight increase in price. 

Prescription charges for medical card holders are to be reduced by another 50 cent, bringing them down to €1.00 per item for those over 70 and €1.50 per item for everyone else.

Also, the maximum amount which patients must pay for drugs and medicines themselves before State subsidies apply under the Drugs Payment Scheme is to be reduced by a further €10 to €114 per month.

The medical card income threshold for people over 70 will be increased by €50 for a single person or €150 for a couple per week, allowing around 56,000 additional people to qualify. 

Other developments in healthcare at a glance are:

  • Free GP care will be extended to the under 8s while dental care will be brought in for the under 6s.
  • One million additional home care hours will be made available. 
  • There will be an extra €25m allocated to the National Treatment Purchase Fund to help reduce hospital waiting lists.
  • The Government also plans to recruit an extra 1,000 therapists, nurses and other healthcare professionals. 

Last year the Government held off at the last minute on increasing the carbon tax but this year there was no reprieve for consumers with the Minister announcing that the tax would increase by €6 to €26 per tonne of CO2.  The Minster also reiterated the Government's commitment to increasing the tax to €80 per tonne by 2030.

Petrol and diesel will be hit by the increased charge from midnight while other fuels will be spared until May 2020.

So what exactly does that mean for your pocket?

Below is an approximate outline of what the tax increase will add to various fuels, as well as the total amount now being paid in carbon tax.

Fuel Increase Total

Gas*

€14 a year

€61 a year

Petrol & diesel

1.5 cent per litre

6.5 cent per litre

Bale of peat / briquettes

14 cent

59 cent

Bag of coal

63 cent

€2.73

Home heating oil**

€15 per fill

€65 per fill

*Based on average annual consumption of 11,000 kWh of gas

**Based on 900-litre tank

The Minster has promised to ringfence the money raised from the carbon tax for mainly environmental, green and public transport initiatives. As part of this, €3 million will be allocated for electric vehicle infrastructure which will double the number of local authority on-street charging points.

Unlike previous years there was no across-the-board increase to social welfare payments, with spending far more targeted than in previous years. Having said that, the Christmas Bonus will be paid at a rate of 100% again this year to all social welfare recipients.

There was no increase to the State Pension or Jobseeker's Allowance.

Other developments in social welfare at a glance are:

  • A €5 increase in the Living Alone Allowance. 
  • There'll be a €15 increase in the One Parent Family Payment.
  • There'll be a €2 per week increase in the Fuel Allowance, partly to help offset the impacts of the carbon tax.
  • €13 million is to be made available to the Warmer Homes scheme to provide free energy efficiency upgrades to households deemed to be at risk of energy poverty.


Often referred to as the death tax, CAT has proven increasingly controversial in recent years as soaring property values mean many people are faced with huge tax bills upon inheriting family assets, in particular the family home. 

The Minister announced a €15,00 increase to €335,000 to the lifetime Group A tax-free threshold, which broadly applies to transfers between parents and their children. However, despite the increase, it remains substantially below the €500,000 target mooted by the Government a few years ago.

A cautious budget?

Fine Gael has long tried to differentiate itself from Fianna Fáil as the party which can be trusted to manage the public finances prudently, and against the backdrop of a no-deal Brexit the Minster kept a relatively tight grip on the public purses. 

However increases to the carbon tax in conjunction with no changes to income tax or the much maligned USC is sure to vex middle-class Ireland while there was little in the way of relief for hard-pressed renters. As a result it remains to be seen if Fine Gael will be punished for this at next year's election.

Don't forget...

We're all about smarter money here at bonkers.ie so if the budget didn't quite do it for your personal finances, remember that you could save hundreds of euro on your household bills right now by switching with bonkers.ie! 

See here for a list of seven easy ways that you can switch and save.

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