Working families face €3k budget mauling
With hikes expected in PRSI and universal social charges, as well as a new property tax and reductions expected in pension relief, struggling families will be hit hard again.
The analysis by business advisers Grant Thornton estimates that a family of four, where the couple has a combined income of €80,000, and a house worth €200,000, will be paying out an additional €3,250 next year — an increase of 22%.
A married couple with two children and a combined income of €40,000, with a house valued at €200,000, will be forking out €490 more.
A single person with no children and an income of €40,000, with a house valued at €200,000, is facing additional charges of €1,750.
According to the figures, those with higher incomes will be hardest hit. A married couple with two children on a combined salary of €150,000 and investment income of €5,000 will see a 13% hike in their tax bill of an extra €8,750 per year.
The estimates are based on a number of assumptions including:
* A 1% rise in the universal social charge (3% rise for those earning more than €100,000);
* Employee PRSI at 4% applied to rental income;
* Reduction of pension relief from 41% to 20%;
* A household charge of €100 per 0.25% of the value of the house — that would mean additional costs of €600 a year for a family home worth €240,000.
The increased costs facing households do not include projected hikes in motor tax rates, deposit interest retention tax, and increases to the old reliables of drink and cigarettes.
According to recent reports, the Government is also considering cuts to some allowances for pensioners and possible reductions to child benefit.
With the Government looking for savings of at least €3.5bn this year — made up of cuts and increased taxes — Grant Thornton said the budget aftermath could badly hit consumer confidence next year.
“There will be a lot of talk in the budget about income tax rates not being increased, but the reality is that disposable incomes are going to take a major hit even if the headline top rate of income tax stays at 41%,” said Peter Vale, tax partner at Grant Thornton.
“Under every scenario we have run, tax bills rise by more than 10%. The Government faces stark choices if it is to meet commitments made to the troika.
“Somewhere in the Department of Finance, officials are running numbers in spreadsheets and every outcome is likely to be unpalatable,” he said.
“It is difficult to envisage a budget next month that is not painful for everybody. With at least €3.5bn being sought from expenditure savings and tax increases, we will all be feeling considerably less well off on Dec 5.
“A big concern has to be how badly the changes impact consumer demand in 2013, thus limiting potential for growth in the economy.”
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