Image Here’s everything you need to know about this year's Budget
Image Daragh Cassidy
Head Writer

There was something for almost everyone in this year's Budget although rapidly rising energy prices and a rise in the general cost of living will take the sheen off many of the tax cut and social welfare measures.

While last year’s Budget focussed squarely on dealing with the fallout from Covid, this year’s Budget was focussed firmly on the recovery.   

The Government announced around €1 billion in new spending measures and over €500 million in tax cuts. 

There was almost ‘something for everyone’ but it was by no means a giveaway budget akin to those of the Celtic Tiger years. And with inflation expected to hit 3.7% for September, according to the Minister, the highest level since June 2008, rising prices as well as increases to the carbon tax will eat into many of the measures announced. 

Here we take a look at the main announcements and what it all means for your pocket.

Income tax and USC

To help offset the effects of rising inflation, and help people at a time when prices are rising, income tax bands and tax credits were increased for the first time in several years. 

Here are the main things you need to know: 

  • The threshold for the second USC band will increase slightly from €20,484 to €21,295. 
  • The PAYE/employee tax credit and the personal tax credit will both increase by €50 to €1,700 i.e. €3,400 in total. This means most employees now won't start paying income tax until they earn €17,000 - high by international standards. 
  • The point at which people start paying the top 40% rate of income tax will increase by €1,500 to €36,800 for a single person, however this is still low by international standards. The cut-off point for married, one-earner couples will rise to €45,800.
  • The above measures will see a single person who earns over €36,800 benefit to the tune of around €415 a year while a married, one-income couple earning over €45,800 will benefit by around €465.
  • The earned income tax credit for the self-employed will also increase by €50 to €1,700 on the back of a €150 increase last year.
  • Income tax and employee PRSI rates will remain the same.
  • The minimum wage will increase by 30 cent to €10.50 an hour.
  • Those working from home will now be able to claim tax relief on up to 30% of their heating and electricity costs (up from 10% at present). The 30% relief on broadband costs, introduced in last year’s Budget, remains the same. See here for everything you need to know about the working from home relief

USC bands 2022

Rate

First €12,012

0.5%

€12,013 to €21,295

2% 

€21,296 to €70,044

4.50%

€70,045 and over


Self-employed income over €100,000

8%


11%

Tax bands 2022

20%

40%

Single

€36,800

Balance

Married (one earner)

€45,800

Balance

Single parent family

€40,800

Balance


The Carbon Tax

The Government has already committed to increasing the carbon tax to €100 per tonne by 2030 so another increase in the tax was almost a forgone conclusion, 

Carbon tax will increase by a further €7.50 to €41 per tonne of CO2. 

Petrol and diesel will be hit by the increased charge from midnight while other fuels such as gas and home heating oil will be spared until May 2022.

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*

€17 a year

€93 a year

Petrol & diesel

2 cent per litre

10.5 cent per litre

Bale of peat briquettes

17 cent

93 cent

Bag of coal**

79 cent

€4.30

Home heating oil***

€19 per fill

€103 per fill

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

**40kg bag

**Based on 900-litre tank

In better news, a personal tax disregard of €200 is being introduced for households that sell excess electricity that they generate back into the national grid.

Social Welfare

For the first time in several years there will be an across-the-board increase in social welfare payments. 

The State pension, jobseekers’ allowance and other welfare payments will increase by €5 a week from January.  

The Christmas Bonus will be paid at a rate of 100% again this year to social welfare recipients. 

The other main social welfare measures announced were:

  • A €5 per week increase in the (winter) fuel allowance to €33, partly to help offset the impacts of the carbon tax rise as well as rapidly rising energy prices, which will take effect from midnight. It will also be available to more people as the income you’re allowed to earn in order to get it is increasing by €20 a week. See here for more information on the allowance and how to apply for it.
  • The back-to-school allowance will increase by €10 from next June.
  • There will be a €3 increase in the living alone allowance to €22 a week.
  • There will be a €5 increase in the carer’s allowance. Significant changes to the means test for the allowance were also announced, meaning more can qualify. One change is that the first €50,000 in savings will be disregarded from the means test, up from the current level of €20,000.
  • Parents’ benefit is to be increased by two weeks to seven weeks from July 2022.
  • The income threshold for the working family payment will also increase by €10 for all families.

Housing

A budget of €6 billion has been allocated to the Department of Housing, Local Government and Heritage - an increase of over 15.5% on last year. 

The main announcements were: 

  • €2.5 billion will be spent on supporting the delivery of around 9,000 new social housing units in 2022.
  • The Help-to-Buy scheme for first-time buyers, which now allows for a tax rebate of up to €30,000, has been extended until the end of 2022. You can find out more about the scheme here.
  • €174m in funding will go to support the delivery of over 4,000 affordable homes next year.
  • An allocation of €585 million for the Housing Assistance Payment (HAP) will enable 14,000 new households to be accommodated in 2022, as well as continuing to support almost 65,000 households already in tenancies by end 2021.

The Old Reliables

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

The excise on cigarettes has gone up by another 50 cent, bringing the price of a pack of 20 cigarettes up to around €15. However excise duty on alcohol as well as petrol and diesel has remained unchanged once again this year. However changes to the carbon tax obviously mean motorists will still be hit. 

Health

An extra €1 billion, or 5.3%, was announced for the day-to-day running of the health service, to a record €20.38bn.

Including capital spending and spending on Covid measures, €22.2 billion will be spent on health next year.

The main announcements were:

  • An extra €10.5 million to fund an additional 19 ICU beds, bringing the total number of critical care beds to 340 in 2022.
  • An extension of free GP care to include six and seven year olds. 
  • €31 million for a dedicated women's health package, to include free contraception for those aged between 17 to 25, and to help tackle period poverty.
  • Another €30 million has been allocated to allow patients greater access to new, high-tech drugs.
  • A reduction in the Drugs Payment Scheme threshold by €14 to €100 per month. 

Transport 

Last week the Government launched its €165bn National Development Plan which outlined its main spending commitments for the coming years. However the Budget saw the announcement of a new youth travel card for all those aged between 19 and 23, which will see holders able to avail of a 50% discount on fares across the transport network.  

‘Hospitality’ VAT rate of 9%

The reduced 9% VAT rate, which largely applies to businesses in the tourism and hospitality sectors (but also applies to a wide variety of consumer services such as restaurants, newspapers, hairdressing, coffee shops, and cinema and concert tickets) will remain at 9% until the end of August 2022.

This should hopefully help relieve some of the upcoming Brexit and Covid-related price pressures. 

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