Earnings boost for workers as bands and credits rise
Workers who pay income tax at the higher rate should see their take home pay rising by around €420 next year as a result of changes announced in the budget.
An increase in the standard rate tax band by €1,500 will see the threshold at which they pay the 40% higher rate of income tax rising from €35,300 to €36,800.
Income tax credits are set to rise by €50 which will see the personal tax credit, the employee tax credit and earned income credit going to €1,700.
Tax credits are the amount a worker can earn before they start paying income tax.
The ceiling for the second rate of Universal Social Charge (USC) is to rise to €21,295 from the start of next year to reduce the impact on lower earners.
Marian Ryan, Consumer Tax Manager with Taxback.com said the increased tax credits were welcome but they would do little to address the rise in the cost of living, particularly for the lower paid.
“The increase of €50 to both the PAYE and Personal Tax Credits will be welcomed along with the increase of €608 of the second USC band will result in additional income of approximately €115 per year for the lower income earners,” she pointed out.
Ms Ryan said the government would have to ensure that the announcement is communicated effectively.
“I say this because we took a survey of over 2,200 taxpayers in the run up to the budget in which 4 in 10 people said they did not understand tax indexation measures like those announced today, and would really like to see those in power speak in more simplified lay mans terms so people can really understand what Budget 2022 will mean for their household,” she explained.
There was also an enhancement introduced to the tax arrangements availed of by those working from home.
A tax deduction amounting to 30% of the cost of vouched expenses for heat, electricity and broadband in respect of those days spent working from home will be legislated for.