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Personal Finance

Here’s everything you need to know about Budget ’19

Daragh Cassidy

Daragh Cassidy

Head of Communications

Budget 2019 brings news of further cuts to the USC, an increase in social welfare payments, free GP care to around 100,000 extra people, an increase in the “tourist” rate of VAT, and new benefits for the self-employed. We take a look at what it all means for your pocket.

It had been thought that the minister would have around €800 million to use in the budget, with the money being divided 2:1 in favour of spending increases over tax cuts, as outlined in the confidence and supply agreement with Fianna Fáil. But due to some revenue raising measures, and the news last week that the Government had received an unexpected windfall of €1bn in corporation tax, that all changed.    

So let’s take a look at what was announced...  

As expected Budget 2019 saw some income tax decreases, although no one will see a huge increase in their take home pay.  

  • The widely-reviled Universal Social Charge has seen another decrease. There will be 0.25% cut to the 4.75% rate to 4.50%.
  • The threshold at which people hit the new 4.50% rate of USC will increase from €19,372 to €19,874.
  • The point at which people hit the higher 40% rate of income tax will also rise by €750 to €35,300. The threshold will rise from €43,550 to €44,250 for married one-earner couples. 
  • The earned income tax credit for the self-employed will increase by another €200 to €1,350.
  • The minimum wage will increase to €9.80 an hour from next year. 

The changes mean that the marginal rate of tax will decline from 48.75% to 48.50% for those earning between €35,300 and €70,044 and, depending on income, taxpayers should see an extra €200 to €300 in their take home pay next year.

However with wages increasing at a rate of around 2 to 3% currently, the 2.17% increase to the standard rate tax band means more people might actually end up paying tax at the higher rate next year.

USC bands 2018 Rate USC bands 2019 Rate
First €12,012 0.5% First €12,012 0.5%
€12,012 to €19,372 2% €12,012 to €19,874 2%
€19,372 to €70,044  4.75% €19,874 to €70,044  4.50%
Balance 8.00% Balance 8.00%

Tax bands 2018 20% 40% Tax bands 2019 20% 40%
Single €34,550 Balance   Single €35,300 Balance
Married (one earner) €43,550 Balance Married (one earner) €44,300 Balance
Single parent family €38,550 Balance Single parent family €39,300 Balance

Housing was unsurprisingly a huge focus of the budget. The main announcements were: 

  • The allocation of €1.25 billion for the delivery of 10,000 new social homes in 2019.
  • An extra €121 million for the Housing Assistance Payment (HAP) in 2019 to provide an additional 16,760 new tenancies.
  • €30 million is being provided next year for homelessness services, bringing the total allocation for such supports to €146 million in 2019.
  • A 67% increase in funding for the Residential Tenancies Board to support more local authority inspections in the private sector.
  • Mortgage interest relief for landlords will rise to 100% from 1 January with the intention that it will put downward pressure on rents.

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

The excise on cigarettes has gone up by €0.50, bringing the price of a pack of 20 cigarettes up to around €12.70. However excise duty on alcohol and petrol and diesel has remained unchanged once again this year.

There was some good news for those on social welfare. All payments will increase by €5 from next March, with the Christmas bonus being restored to 100% for the first time since the crash.

Other developments in social welfare at a glance are:

  • PRSI for the self-employed is to be expanded to include jobseeker’s allowance.
  • The home carer credit will rise by €300 to €1,500.
  • €25 increase in both the back to school clothing and footwear allowance rates.
  • A new paid parental leave scheme will be introduced in November 2019 to provide an extra two weeks' leave to every parent of a child in their first year, with the intention of increasing that to seven weeks over time.

Medical card holders over the age of 70 will be pleased to hear that prescription charges are to be reduced by €0.50 from €2.00 to €1.50 per item.

Also, the maximum amount which patients must pay for drugs and medicines themselves before State subsidies apply under the Drug Payment scheme is to be reduced by €10 from €134 to €124 per month.

Free GP care is expected to be extended to 100,000 more people as a result of a €25 increase in the income threshold for the GP card. The threshold for a couple will rise by €45.

An additional €84 million will also be provided for mental health services in 2019, bringing the total available funding for mental health to €1 billion. An increase of 9%.

The had been much speculation that the Government would announce an increase in the carbon tax from €20 to €30 per tonne. This would have added around €25 to the average annual gas bill and 2 or 3 cent to a litre of petrol and diesel, which is the last thing energy customers would have needed given the increase in energy prices that we’ve already seen this year.   

In the end the Government left the tax unchanged for now.

In 2011 the then Minister for Finance announced a reduction in the lower rate of VAT from 13.5% to 9% for the tourism and hospitality sector to help with employment creation.

As well as applying to hotels, the reduced rate has also applied to a wide variety of consumer services such as restaurants, newspapers, hairdressing, coffee shops, and cinema and concert tickets.

However it has been criticised in recent times as having done its job and as now simply providing a subsidy to big hotel and restaurant chains, which have raised prices considerably as the tourist market has boomed.

As a result the increase in the rate of VAT had been well flagged. It remains to be seen if the increase will be passed fully onto consumers in the form of higher prices, of course, but given the variety of services it covers, it’s not just tourists who might feel the extra pinch in their pockets over the coming year. However the Government is keeping the rate at 9% for newspapers and sporting facilities and reducing it from 23% to 9% for electronic publications.     

The local property tax was introduced in 2013 and is levied at a rate of 0.18% on the value of your house (within certain bands). At the moment it’s based on 2013 house prices and the idea was that the valuations – and thus the tax due – would be reviewed every three years. However, in the wake of a big jump in house prices, the former minister for finance Michael Noonan deferred the revaluations due in 2016 until 2019. But with property prices continuing to increase, householders face a big increase in their bill next year unless the tax is changed.

As a result the Government has committed to reforming the tax but little new was said in today's budget with the minister simply reiterating that any changes to the tax will be moderate and appropriate.

A reckless budget?

Although Fine Gael has long tried to differentiate itself from Fianna Fáil as the party which can be trusted to manage the public finances prudently, this budget almost had the hallmarks of an election budget, with spend up considerably compared to last year.

And although the €1bn windfall in corporation tax is unlikely to be repeated next year, the Government was happy to spend it all.  

For next year, the Government is aiming for a balanced budget for the first time in around a decade. But with the economy firing on all cylinders and employment at record levels, the focus should surely be on aiming for a surplus and trying to pay down our huge mountain of national debt before the next downturn inevitably arrives. After all, if we can barely manage to balance the books during the good times, what hope is there that we'll be able to manage our finances when things get tough?

Having said that, it's difficult to argue against a big increase in spending given the huge strains that exist in the areas of health, housing and even transport.

The key question now is whether we can trust the Government to give us value for money and deliver actual results.     

Don't forget...

We're all about smarter money at bonkers.ie so if the budget doesn't quite do it for your personal finances, remember that you can save hundreds of euro on your household bills by switching and saving with bonkers.ie today! 

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