No one earning €13,000 or less will pay the Universal Social Charge under changes announced in Budget 2016.
Meanwhile, a reduction in the percentages payable for higher income brackets mean all workers will benefit by between €500 and €1,000 per year.
The entry threshold to USC - the minimum level at which the payment kicks in - has been raised from €12,012 to €13,000, entirely removing approximately 42,500 additional workers from the USC net.
Delivering his Budget speech today, Minister Michael Noonan said he estimated that more than 700,000 income earners would not be liable to pay USC at all from next year.
Under the measures announced today, anyone who earns more than €13,000 will pay USC at the following rates:
- The 1.5% rate is reduced to 1% on the first €12,012 of income;
- The 3.5% rate is reduced to 3% on income over €12,012, up to an increased threshold of €18,668;
- The 7% rate is reduced to 5.5% on income over €18,668, up to €70,044.
This will reduce the marginal rate of tax to 49.5% for all earners under €70,044. This is the first time since the supplementary budget in April 2009 that the marginal rate has dropped below 50% for middle income earners.
Business chief said the cuts would take the marginal tax rate below 50% – a psychologically important breakthrough.
But some critics warned the new regime was more heavily weighted in favour of the better off with a single person on €25,000 a year €227 better off, compared to more than €500 for someone on €45,000 and €884 for someone on 70,000.
Self-employed workers would also do well with an extra €936 a year on a €35,000 salary, or €1,456 on a €70,000 income.
The higher rates of 8% for income between €70,044 - €100,000 and any PAYE income over €100,000, and the 11% rate for self-employed income over €100,000 remain unchanged.
The exemption from the top rate of USC has been retained for all medical card holders and those over-70 earning less than €60,000. This group will benefit from the reduction in the second USC rate to 3% from 3.5%.