Budget 2023: Government to increase entry point for top tax rate to €40,000

It is understood that Public Expenditure Minister Michael McGrath has finalised his spending package for Tuesday’s budget which is to be approved by the three leaders in Government this evening
Budget 2023: Government to increase entry point for top tax rate to €40,000

Finance Minister Paschal Donohoe. Picture: Leah Farrell / RollingNews.ie

The Government will sign off on a large increase to the point at which people pay the top rate of tax to bring it close to €40,000 in Tuesday’s Budget.

At present, the higher 40% tax rate kicks in on income over €36,800 for a single person. Finance Minister Paschal Donohoe is set to raising this point by €3,200 with a similar increase for married couples or those in a civil partnership on one income.

It is also expected that there will be additional tax credits for renters of between €200 and €400 with the final amount yet to be agreed.

The Irish Examiner understands that there will be 50-cent excise hike on a pack of 20 cigarettes, but it has been confirmed that there will no move up or down on alcohol excise.

It is also understood that the current cut in fuel excise will be extended to February at least and it is likely to be extended beyond that.

In terms of the Universal Social Charge, the only move likely will be to ensure minimum wage increases don’t negatively impact low income earners.

Budget measures to be approved by Government leaders

Public Expenditure Minister Michael McGrath has finalised his spending package for Tuesday’s budget which is to be approved by the three leaders in Government this evening.

Speaking on his way into that meeting at Government Buildings, Mr McGrath said: “I have concluded pretty exhaustive negotiations with all of my colleagues across government and I am in a position to recommend the set of proposals on the expenditure side to the party leaders, which I believe is fair is balanced, I think it will make a real difference to people throughout the country,” he said.

Along with Finance Minister Paschal Donohoe, Mr McGrath said the priority is to give help to families, businesses, sports clubs and all who will face very high energy bills this winter.

Finance Minister Paschal Donohoe and Minister for Public Expenditure and Reform, Michael McGrath. Picture: Sasko Lazarov/RollingNews.
Finance Minister Paschal Donohoe and Minister for Public Expenditure and Reform, Michael McGrath. Picture: Sasko Lazarov/RollingNews.

He said it was his expectation that the Budget would be approved tonight to allow all the supporting documentation be printed in time for Tuesday’s official announcement.

“Our expectation would be that we will continue to budget in substantive form this evening,” he said.

Mr Donohoe confirmed that negotiations were fractious at times with other ministers, saying they were “very demanding discussions”.

On energy, asked if the package to be announced will be enough for people, Mr Donohoe said he and Minister McGrath are very much aware of the needs of households and businesses.

“And we've worked very intensively to look at ideas and options that will provide support, particularly as we move into winter,” he said.

“We're very much aware of the concerns that many have regarding the cost of living in their homes. And both of us are also very aware of the needs of business. So we have a number of different options in relation to that which we'll be discussing with the party leaders,” he said.

Daniel McConnell

Earlier: 'Gulf of several hundred million' between McGrath and Donnelly

The main battle remains between Michael McGrath’s Department of Public Expenditure and Reform and Stephen Donnelly’s Department of Health with a “gulf of several hundred million” remaining with hours remaining. Photo Garrett White/ Collins Agency
The main battle remains between Michael McGrath’s Department of Public Expenditure and Reform and Stephen Donnelly’s Department of Health with a “gulf of several hundred million” remaining with hours remaining. Photo Garrett White/ Collins Agency

Earlier, it was reported that a “gulf of several hundred million euros” remained between Ministers Stephen Donnelly and Michael McGrath over the amount of money available for health spending in 2023.

Several leading departments such as health, agriculture, justice, and social protection are still to finalise their numbers ahead of a meeting this evening of the three party leaders in Government to sign off on the overall package, which will bring Government spending to over €90bn.

It is understood that Mr Donnelly may have to delay or abandon some of his desired new measures such as eliminating hospital charges which may not be introduced until some point next year.

Discussions are also continuing between Mr McGrath and Charlie McConalogue's Agriculture Department with an end reported in sight on Sunday afternoon. Agriculture and DPER are said to be closing in on a package of measures to support farmers who are continuing to deal with the fallout of the Ukraine invasion and its impact on feed and fertiliser prices.

Other departments

There will also be a focus on the Brexit Adjustment Reserve (BAR) in McConalogue's war chest. 

Meanwhile, farmers will be eyeing up what environmental measures and financial supports will be in the budget given that they are now facing a 25% emissions reduction in the sector.

2023 will also see the start of the new Common Agricultural Policy (CAP) so exact funding for a range of new schemes including suckler beef, sheep and environmental schemes will be announced on Tuesday.

Helen McEntee, the Justice Minister, is expected to get budget funding to recruit more than 800 gardaí next year to bring the Garda force of around 14,400 another step closer to the government target.

There will be additional school bus funding to resolve the row over pupils left without places. There is going to be a €6 million social inclusion fund to keep disadvantaged children in school as long as possible.

It is also certain that Eamon Ryan will retain the 20% average fare reduction for public transport services beyond the end of the year and getting increased funding for regional bus services.

Helen McEntee, the Justice Minister, is expected to get budget funding to recruit more than 800 gardaí next year to bring the Garda force of around 14,400 another step closer to the government target. Picture: Stephen Collins /Collins Photos
Helen McEntee, the Justice Minister, is expected to get budget funding to recruit more than 800 gardaí next year to bring the Garda force of around 14,400 another step closer to the government target. Picture: Stephen Collins /Collins Photos

The planned carbon increase of €7.50 will be implemented to pay for more retrofitting, higher fuel allowance and agri-environmental schemes.

There is also likely to be up to €6 million in funding for a sports package including a new coaching fund and more support for high-performance athletes.

The Department of Housing is also set to surrender “a huge chunk” back to allow other departments deliver some of their asks.

There is also concern at proposals to help renters with the Department of Finance concluding the Department of Housing is only counting between 50pc and two-thirds of the number of renters in the current market in the context of proposed tax reliefs for renters.

However, the Irish Examiner understands that agreement is likely on increasing the current €5,000 limit on the amount of tax relief landlords can claim on pre-letting expenses to try to keep them in the market.

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