Workers will be better off by up to €350 a year after USC cuts

The majority of workers will be better off by between €200 and €350 a year after Finance Minister Michael Noonan confirmed 0.5% cuts to the lowest three universal social charge rates, writes Fiachra Ó Cionnaith of the Irish Examiner.

Workers will be better off by up to €350 a year after USC cuts

The majority of workers will be better off by between €200 and €350 a year after Finance Minister Michael Noonan confirmed 0.5% cuts to the lowest three universal social charge rates, writes Fiachra Ó Cionnaith of the Irish Examiner.

The move was a central part of the Government's tax changes in budget 2017, which also include cuts to DIRT tax, increases in inheritance and capital gain tax thresholds, an "opt out" tax year for struggling farmers and new self-employed supports - and were announced as the Finance Minister said the lessons from the crash "must not be forgotten".

Under plans announced by Mr Noonan in yesterday's Dáil debates, the lowest three rates of USC - 1%, 3.5% and 5.5% - will all be reduced by 0.5%.

The rates involve people earning up to €12,012, €12,013 to €18,772 and €18,773 to €70,044 respectively, and mean someone on a salary of €70,000 is now €350 better off a year, with similar results for those on less money.

Details of USC cuts:

Incomes of €13,000 or less are exempt. Otherwise,

* €0 to €12,012 @ 0.5%

* €12,013 to €18,772 @ 2.5%

* €18,773 to €70,044 @ 5%

* €70,045 to €100,000 @ 8%

* PAYE income in excess of €100,000 @ 8%

* Self-employed income in excess of €100,000 @ 11%

Accepting "high marginal tax rates discourage people from taking jobs and discourage emigrants from returning home", Mr Noonan said he was using €350m next year "to improve the take home pay of low and middle income earners" through the USC cuts.

In order to ensure a full-time worker on the minimum wage is not forced to pay a higher rate of USC because of the drop, he has also increasing the previous €18,668 starting point for the second USC rate to €18,772.

The changes were one of several tax cuts in budget 2017, including a 2% DIRT tax reduction "for the next four years" which will see savers benefit by a reduction from 41% to 33% by the end of the decade.

In a separate move which Mr Noonan said is to help families cope with "increased asset prices which are resulting in higher tax demands", the rate at which inheritance tax comes into play has also risen by €30,000, to €310,000.

Capital gains tax for entrepreneurs and start-ups has also been cut, from 20% to 10%, up to a "up to a limit of €1m in chargeable gains" following on from a similar 10% cut in budget 2016, while other areas are also set to benefit.

Accepting some farmers are struggling due to recent floods and the instability caused by the Brexit fallout, Mr Noonan said he was instigating a one year "opt out" system for the sector during its five-year rolling average taxation cycle, alongside a 0.2% VAT increase for farmers from 5.2% to 5.4%.

While other changes include a €1,270 annual income tax credit for fishermen which will "shelter" income up to €6,350, tax reliefs to home owners who undertake renovations and the restoration of full interest deductability for landlords by 2020 as part of 5% increases every year.

The amount of money people who rent out a room in their homes can avoid tax on has also risen to €14,000, while an extra €400 a year will also be given to the self-employed through the increase of

the earned income tax credit to €950 - helping 147,000 people nationwide.

As he announced the tax cut measures, Mr Noonan stressed the lessons of what caused the crash "must not be forgotten".

However, he was heavily criticised by Sinn Féin finance spokesperson Pearse Doherty, who accused Fine Gael and Fianna Fáil of "hallowing out" the tax base and returning to a tradition of trying to buy future election votes.

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