Thursday 01 February 2018

Some Budget changes announced back in mid-October kicked in almost immediately (eg Cigarette duties were increased by 50c from midnight the day after Budget Day) but some took effect at the start of this month and more are to come in later this year (eg increase in social welfare payments).

The larger part of the changes taking effect in January 2018 related specifically to personal taxation – changes to tax bands, USC rates etc.

Taxation

Tax Bands

The upper limit whereby a single individual can earn at the lower rate of tax has been increased by €750 to €34,550 – this that anything earned over this limit will be subject to the rate of 40% tax. In terms of practical impact – the direct impact on your pocket – the changes to income tax and USC are the main changes to note today.

The entry point for single earners to get charged the higher rate of tax will increase from €33,800 to €34,550, a rise of €750.

This means that anyone earning under €34,550 will only be charged the normal rate of tax, while those earning over it will see a slight reduction in the tax that they pay.

The standard rate band for married one-earner couples rises from €42,800 to €43,550.

USC

The 2.5% rate of USC will reduce to 2%, and the ceiling for this new rate will increase from €18,772 to €19,372.

The 5% rate of USC, meanwhile, will reduce from 5% to 4.75%.

Adding the above tax and USC changes together, it results in savings of around €250 a year for earners on €40k a year.

Earned Income Tax Credit

This credit will increase from €950 to €1,150. This is relevant for taxpayers earning self-employed trading or professional income in certain cases and for business owner/managers who are ineligible for a PAYE credit on their salary income.

Minimum wage

The national minimum wage increases from €9.25 per hour to €9.55 per hour from today.

Health

The prescription charge for medical card holders under the age of 70 is being reduced from €2.50 per item to €2 per item from today. The monthly cap will be reduced from €25 to €20.

VAT on sunbed services increases from 13.5% to 23%. This increase was to highlight medical opinion of a link between sunbeds and skin cancer, and is made out of a concern for public health.