What to expect in the upcoming Budget

On 7th October, Minister for Finance Jack Chambers will present his second Budget to the Dáil along with Minister for Public Expenditure Paschal Donohoe. 

This year there has been far less kite flying than usual. So making predictions is harder. 

Last year, with the coffers overflowing with corporate tax receipts, a €13 billion Apple windfall, and a general election on the horizon, the Government was in a generous mood and many of the big Budget day announcements were leaked well in advance. 

This year, the Irish presidential election has meant a lot of media attention has been focussed elsewhere. And with Trump's tariffs still creating huge economic uncertainty, and repeated warnings from the Central Bank, the Irish Fiscal Advisory Council and many other bodies that the Government needs to get spending under control, a much tighter Budget is expected.  

So here’s a round-up of what we can — or rather cannot — expect, and whether you’ll be much better off for next year.    

1. Energy credits 

Last winter a €250 electricity credit was paid to all households in two €125 instalments (and the winter before a credit of €450 was paid in three €150 instalments).

Although electricity prices are back on the rise, the Government is adamant that no universal energy credits will be paid this year.

So if you want to save on your energy bills this winter, the best thing is to switch supplier. Which you can do quickly and easily on bonkers.ie.

2. VAT on energy bills

The Government temporarily reduced the rate of VAT on gas and electricity bills from 13.5% to 9% back in 2022.

It’s due to come to an end at the end of October but it's likely the reduced rate will be extended for at least another six months.

Energy costs are still high, and with the Government unlikely to pay any credits, it's unlikely to want to add further costs to bill payers.

If the Government were to hike back up the rate of VAT it would add around €65 a year to the average annual electricity bill and around €55 a year to the average annual gas bill. 

3. Winter fuel allowance 

Last year, households in receipt of the winter fuel allowance received an extra lump sum of €300 before Christmas in addition to their regular weekly payment. 

It's unlikely a lump sum will be paid this year as the Government is trying to wean us off continued lump sum payments.

However the €33 weekly payment is likely to increase. 

See here for more information on the allowance and how to apply for it.

4. Increase in the minimum wage

The Low Pay Commission has recommended an increase in the minimum wage to around €14.15 an hour, which the Government looks likely to confirm on Budget day, despite strong opposition from many businesses.

5. Tax cuts 

At the moment anyone who earns over €44,000 a year pays income tax at the top 40% rate on anything they earn above this amount. 

This is low by international standards and is even below the average full-time wage in Ireland.

Last year the cut-off rate was increased by €2,000. This year it may be increased by another €1,000 or €1,500, meaning workers can earn another few euro before being taxed at 40%. However there is the possibility it won't be increased at all, which would effectively amount to a tax hike. 

The USC rates and bands may also be tweaked to take account of a rise in the minimum wage.

The main tax credits may also be increased slightly. Tax credits sound complicated but they're not really. They simply reduce your tax bill by the size of the tax credit. 

The single person tax credit of €2,000 and the employee tax credit of €2,000 (which all PAYE workers get) might each increase by €75 to keep up with inflation, so €150 in total. 

This would save the average worker €150 a year or around €13 a month.   

Some other tax credits such as the home carer tax credit may also be increased.

However there is a huge amount of uncertainty over whether there will be any tax cuts at all this year, so there's a possibility none of the measures above will be announced.

6. Reduced rate of VAT on food

A main reason why there is uncertainty over any tax cuts for workers this year is that the majority of the €1.5 billion which the Government says it has at its disposal to pay for tax cuts is to be taken up by a reduction in the rate of VAT on food in hotels and restaurants from 13.5% at present to 9%.  

Any reduction in VAT is unlikely to be passed on to consumers though.  

Business groups and restaurants say the reduction is needed to help them lower their VAT bills and survive, not to lower prices.

The reduced rate will also only apply to food and not to hotel rooms as was previously the case. 

7. The Christmas bonus 

The double payment of social welfare payments in December i.e. the "Christmas bonus" will likely be repeated.

8. Welfare rates/pension 

There is also likely to be a small increase of €5 or €10 a week in most social welfare rates.  

While reports suggested a €12 increase had been asked for, this has been rebuffed by the Department of Finance.

The rate of children's allowance may not change, nor is there likely to be a second-tier payment for lower-income households for now. Instead the Government is likely to focus on increasing other payments such as the working family payment. 

9. Carbon tax

The carbon tax will rise again. 

Carbon tax will increase by a further €7.50 to €71 per tonne of CO2.

This will add around another 2 or 3 cent to every litre of petrol and diesel.

It will also add around another €20 a year to the average annual gas bill. 

10. Excise duty 

It's unlikely that excise duty on alcohol or fuel will increase. 

But another 50 cent hike on a packet of cigarettes seems almost certain.