Households face cost increases of up to €1,000 a year

The Government is expected to announce a moderate tax package in next month’s budget that should see the average worker take home around €500 to €600 extra a year. However, cost increases as well as the increase in PRSI mean much, or all, of this gain will be swallowed up by higher costs for many households. File picture

Households face cost increases of up to €1,000 a year as higher gas and electricity prices, health insurance premiums, mortgage repayments, and streaming costs kick in over the coming weeks.

Workers will also face a hike in their PRSI payments and public transport fares will jump by 15% on average from January.

The increases will largely erode any gains that households may make from next month's budget, with many workers potentially seeing the benefit of any tax cuts completely wiped out by higher household costs and PRSI.

While higher prices are expected every year, now people are facing into the prospect of rising costs from a place of avoidable disadvantage, after the previous budget failed to link tax bands to inflation, said Oliver Browne, assistant professor in accounting in University College Cork (UCC).

It meant that even without specific tax increases, people were actually left worse off due to inflation.

Analysis by the comparison and bill switching site Bonkers.ie shows that many households will be paying around €140 a year more for their gas and €180 more for their electricity from next month as price hikes from some of the major energy suppliers come into effect.

Further hikes in private health insurance will see many families having to pay an extra €200 to €300 or more for cover, Bonkers.ie estimates. 

The VHI is increasing its premiums  by 2.75% on average from October, having previously raised its premiums by 3% in March. Laya Healthcare customers will see an even bigger increase.

Those with a tracker mortgage will have to contend with higher mortgage repayments. Two interest rate hikes from the ECB since June mean someone with €150,000 remaining on their mortgage over 10 to 15 years will be paying over €30 extra a month or around €400 more a year. 

Although the big three banks have left their variable and fixed rates unchanged for now, AIB, Bank of Ireland, and PTSB are expected to follow suit and increase their rates before the end of the year, according to Daragh Cassidy of Bonkers.ie.

Netflix, which is a staple in many Irish households, has also hiked its most popular plans by €2 a month or €24 for the year.

From January, public transport fares will increase by 15% on average. If the Government proceeds with hiking the carbon tax again, it will add another 2c-3c cent to every litre of petrol and diesel and around €20 to the average annual gas bill.

On top of this, PRSI is increasing from 4.20% to 4.35% from October, which will see the average worker pay an extra €75 a year in tax.

The Government is expected to announce a moderate tax package in next month’s budget that should see the average worker take home around €500 to €600 extra a year. However, cost increases as well as the increase in PRSI mean much, or all, of this gain will be swallowed up by higher costs for many households.

"Increasing costs mean many households could still be worse off next year despite pledges by the Government to reduce the tax burden on workers in the upcoming budget,” said Mr Cassidy.

Last year’s budget focused on helping businesses but this year’s budget is more likely to include some supports for personal taxpayers, in response to a voter base that is now disillusioned with the cost of living, Prof Browne said.

Ireland’s current tax policy means that people hit the highest rate of tax much more quickly than many of their European neighbours, he said.

So although Ireland does not set particularly high tax rates, it taxes many people at the highest rate much more quickly than other countries.

Changing the Vat rate on home heating oil  is something that would have immediate impacts on people’s pockets, he said, adding that linking tax bands to inflation would also give taxpayers some relief.

"At the moment, we're only running to stand still," he said.