What to expect in the upcoming Budget

On Tuesday 6th October, Tánaiste and Minister for Finance Simon Harris will present his first budget to the Dáil along with Minister for Public Expenditure Jack Chambers.

Despite repeated warnings from the Central Bank, the Irish Fiscal Advisory Council and many economists that the Government needs to get spending under control, a fairly substantial budget package of around €10bn is likely to be announced. But as in previous years, the vast majority of this money is likely to go on spending measures as opposed to tax cuts.  

As is customary with the budget, there's been a fair amount of kite flying over the past few weeks. So here’s a round-up of what we can — or cannot — expect, and whether you’ll be much better off next year.    

1. Energy credits 

Although gas and electricity prices are back on the rise, and a near record number of households are in arrears on their energy bills, 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. Winter fuel allowance 

The Government is likely to announce more targeted measures to help those with their energy bills instead.

Last year the winter fuel allowance payment was increased from €33 to €38 a week. And this year it's likely the Government will increase the payment again by a similar amount.  

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

3. Carbon tax 

The carbon tax is due to rise again. But given continued high fuel and energy prices, the Government may announce that it will slow the rate of increase.  

The tax is currently €71 per tonne of CO2 and is due to increase by another €7.50 on budget day. And by 2030, the rate is due to reach €100.

If the Government proceeds with the hike, it will add another 2 or 3 cent to every litre of petrol and diesel and another €20 a year to the average annual gas bill. 

However, last year's hike in the carbon tax, which was due to come into effect on gas and home heating fuels in May, was deferred. So the Government also needs to decide if it wants to reinstate last year's hike before proceeding with this year's hike too.      

4. Increase in the minimum wage

The Low Pay Commission has recommended an increase in the minimum wage to €14.94 an hour, which the Government looks likely to confirm on Budget day, despite strong opposition from many businesses.

5. Tax changes 

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

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

Last year, somewhat controversially, the cut-off rate was left unchanged, which pushed more people into paying the top rate of tax.

This year, however, the Government is almost certain to increase the rate, by at least €2,000 or €2,500, meaning workers can earn another few euro before being taxed at 40%. 

If the rate is increased by €2,000 to €46,000, someone earning over this amount will benefit by €400 a year or just over €33 a month. 

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 €50 or €75 to keep up with inflation, so up to €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.

6. The Christmas bonus 

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

7. 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 suggest a €12 to €15 increase has been asked for, this is unlikely.

However the rate of children's allowance, which has not increased for around a decade, will 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. 

8. Excise duty 

It's unlikely that excise duty on alcohol or fuel will increase. However, since April, the Government has reduced excise and tax on diesel by 32c and on petrol by 27c a litre, so it needs to decide how and if it will reinstate this.    

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

9. Rent credit 

The rent tax credit, which is currently €1,000 for a single person and €2,000 for a couple, is due to increase again.