USC cut, increased rent tax credit and new energy credits announced in €14bn budget
A man in Doheny & Nesbitt public house in Dublin watching Finance Minister Michael McGrath unveil Bugdet 2024. Picture: Liam McBurney/PA Wire
Finance Minister Michael McGrath and Public Expenditure Minister Paschal Donohoe have outlined the measures included in Budget 2024 with families, pensioners, workers, mortgage holders, and the self-employed all getting a boost.
- Three €150 energy credits for every household;
- USC being reduced from 4.5% to 4%;
- Employee PAYE and earned income tax credits will be increased by €100 each;
- Increase in weekly rates of payments to all working age recipients and pension payments by €12 per week;
- Standard rate of income tax cut off point to be increased by €2,000 bringing entry to the higher rate of income tax up to €42,000;
- 9% VAT rate for gas and electricity extended for another 12 months;
- Home carer and single person child carer credits to rise by €100;
- Restoration of 8c on petrol and 6c on diesel deferred to April 24 and August 1;
- Rent tax credit raised to €750, increased from €500;
- Help to Buy scheme extended to 2025;
- One-year mortgage interest tax relief, capped at €1,250 per property;
- Rent to Buy scheme extended to the end of 2025 Carbon tax to rise from midnight, from €48.50 to €56;
- Minimum wage to rise by €1.40 to €12.70;
- Excise duty on a packet of 20 cigarettes to rise 75c, bringing the price of cigarettes in the most popular category to €16.75.
Beginning his address in the Dáil, Mr McGrath said it was his role to balance the current needs of society, while ensuring the “wellbeing of our economy for generations to come”.
Mr McGrath said that Budget 2024 will provide support to individuals, families and businesses at a time when cost-of-living and inflation levels were high.
"For many, the impact of inflation resulted in a deterioration in living standards in the last year,” he said.
Mr McGrath said tax revenue this year was forecast to reach approximately €88.3bn, a downward revision compared to earlier forecasts. He also said that corporation tax receipts had fallen sharply in the summer.
He said the measures included in this year's budget amounted to roughly €14bn, as well as "once-off cost of living measures" worth €2.7bn.
Mr McGrath announced a number of measures aimed at addressing the rising cost-of-living measures, including three €150 energy credits for every household across the country which spread across this year and next year.
Other measures announced include:
- 370,000 recipients of the fuel allowance will receive a winter lump-sum of €300.
- 47,000 recipients of the living alone allowance will also receive a €200 lump sum this winter.
- Double payments of the child benefit totalling €280 for up to 1.5m recipients.
- Those availing of the working family payment will receive a €400 lump sum this side of Christmas.
- 370,000 children will benefit from a €100 lump sum qualified child increment.
In his address to the Dáil, Mr Donohoe announced a social protection package for 2024 worth almost €1.1bn targeted to "those with the greatest need."
This package includes:
- An increase in weekly rates of payments to all working age recipients and pension payments by €12 per week;
- An increase in the weekly rate of the qualified child by €4 per week;
- Extensions of Parent’s Benefit from 7 to 9 weeks;
- The extension of child benefit in respect of children aged 18 in full-time education
- €54 per week increase in the Working Family Payment threshold;
- An increase in the income disregard for Carer’s Allowance to €450 for a single person and to €900 for a couple;
- The extension of hot school meals and extension of hot school means next year to non-DEIS primary schools from April 2024;
- The introduction of a pay related benefit for jobseekers subject to government agreement and the necessary PRSI increases which links the rate of benefit to a person’s previous earnings from December 2024;
- Extensions of the free travel scheme to people medically certified unfit to drive from July 2024;
- An increase in the rate of Domiciliary Care Allowance from €330 to €340 per month from January 2024;
- And a reduction of the wage subsidy scheme weekly hours threshold for employers to avail of the scheme from 21 hours to 15 from April 2024.
The foster care rate will also increase by the end of 2024 by €75 per week for children under 12, and €73 per week for children over 12, bringing it to €400 and €452 per week respectively, he said.
Mr Donohoe also announced that, to address the long-term sustainability challenges faced by the pension system, PRSI contribution rates will increase by 0.1% on October 1 next year.
On taxation, Mr McGrath said workers would benefit from changes in income tax bands and adjustments to Universal Social Charge (USC) rates under a personal income tax package worth €1.3bn.
"As incomes rise, it is vital that adjustments are made to our personal tax system," he said.
Mr McGrath told the Dáil the Employee PAYE and earned income tax credits will be increased by €100 each.
He said the Government was increasing the standard rate of income tax cut-off point by €2,000 bringing entry to the higher rate of income tax up to €42,000.
The 4.5% rate of USC will be cut to 4% - its first reduction in five years.
To ensure lower-income workers remain outside the higher rates of USC, Mr McGrath said entry to the 4% rate will be increased to €25,760, meaning a full-time worker on the minimum wage will see an increase in their net take home pay of around €2,300.
"Taking the example of a single person earning €46,000 in 2024, they will see an increase of over €2,000 in their net income as a result of cumulative income tax and USC changes since 2021," he said.
However, duty on a packet of 20 cigarettes will go up by 75 cents.
This will bring the price of cigarettes in the most popular price category to €16.75.
Mr McGrath said that in light of public health interests, he is proposing to bring in a new domestic tax on e-cigarettes, but this will require legislation.
On housing, Mr McGrath confirmed that renters would see a €250 increase in the rent tax credit, with it to rise to €750 a year.
The Minister also said that there would be an introduction of a one-year mortgage relief scheme for homeowners with repayments outstanding between €80,000 and €500,000.
The relief itself is due to be capped at €1,250 per property, with the package set to benefit 165,000 mortgage holders. The plan itself will cost approximately €125m, he said.
Mr McGrath also confirmed that there would be new temporary tax reliefs to primarily benefit small landlords.
This will see tax on rental income – up to €3,000 – disregarded at the standard rate. This will increase to €4,000 in 2025 and then to €5,000 for 2026 and 2027.
However, Mr McGrath said that any landlords availing of this relief must remain in the rental market for four years, or the full tax relief would be “clawed back”.
On vacancy, Mr McGrath confirmed that the vacant land tax would be hiked to five times beyond the current local property tax rate. This change is set to come into effect in November, he said.
On the Help-to-Buy Scheme, the Finance Minister confirmed it will be extended to 2025, adding that he will consider in the next budget if “any changes are required”.
Additionally, anyone availing of the Local Authority Affordable Purchase Scheme will now be eligible to access Help-to-Buy.
Overall, Mc McGrath said housing was "undoubtedly the biggest domestic challenge we face today and remains a top priority for Government."
A cut to childcare costs will not take effect until next September under plans announced in today's budget.
Under the childcare section of the Budget, Mr Donohoe outlined how the Government aims to increase the National Childcare Subsidy (NCS) rate from €1.40 to €2.14, as well as an increase to €5.30 for families with extra needs. He also said the NCS to the parents of 2,000 children who use childminders.
Mr Donohoe said that budget documents put the cost of these plans at €41m, with an additional €10.5m in core funding for the sector, which aims to keep staff in the industry.
Another €4.5m will be spent on the initial rollout of an Equal Participation Model (EPM), which will see a "proportionate mix of universal and targeted supports" for children and families who are disadvantaged to allow them access childcare services.
He said there will be a rise in the Qualified Child payment by €4 to €46 per week for under 12s, and €54 for over 12s. He also said the hot school meals programme will be expanded to a further 900 primary schools from April.
Parents benefit will be extended to nine weeks in August 2024 and Child Benefit will paid for any children up to 18 who are in full time employment. There will be a double payment of Child Benefit before Christmas, though the core rate will not change.
Mr Donohoe added that the Department of Children will also increase the foster care rate by the end of 2024 by €75 per week for children under 12 and €73 for those over 12, bringing them to 12 €400 and €425, respectively.
Under the budget, the Irish Human Rights and Equality Commission will receive additional funding, while €1.9bn will be set aside for international protection and those coming from Ukraine.
On education, Mr Donohoe confirmed that free school books and classroom resources would be provided to all Junior Cert cycle students starting next September.
According to Mr Donohoe, the scheme will benefit 210,000 students and cost €67m.
There is also set to be €81m worth of capitation funding provided to schools, restoring capitation levels to pre-2011 levels. This will come alongside an additional €61m to assist schools in day-to-day running, including costs like heating and electricity.
Further funding will also be provided to fund an additional 1,216 SNA posts and 744 new teacher positions.
“Education is vital for investment in supporting our children and our future,” Mr Donohoe said.
“Today’s budget builds on the progress we have made in building a more inclusive education system and will provide for over 740 additional teachers to support those with special education needs in special classes, special schools and mainstream settings."
A total of €10.5bn is set to be provided to the Department of Education, with €900m worth of capital spending to allow for the construction of new infrastructure.
Mr Donohoe said that this capital funding will help facilitate the rollout of new school building projects, including the 300 projects that are underway.
For third-level students, Mr Donohoe confirmed that there would be a €1,000 once-off cut in the student contribution fee, alongside an increase in the Post Graduate Tuition fee contribution by €1,000 for any grant recipients.
He added that there would be a once-off 33% cut in the contribution fee for apprentices in higher education.
There will also be increases to the existing grant schemes, with maintenance grant rates set to be hiked by €615 with pro rate increases for students in the current academic year. These maintenance grants for postgraduate students will be restored to be in line with undergraduate levels.
Mr Donohoe said that investing in further and higher education is an “investment in innovation, creativity and our future”, with €4.1bn to be allocated to the sector.
In particular, Mr Donohoe confirmed that €60m would be allocated to help the overall sustainable funding of the sector. An additional €4.1m will go towards creating additional medicines course places.
For apprentices, €67m will be allocated towards the Craft Apprenticeship system to increase the number of places to 16,000, with Mr Donohoe saying it will “grow our capacity to deliver on Government priorities”, particularly housing.
Mr Donohoe added that his officials will bring forward legislative options to change how the National Training Fund operates, saying that the fund needs to be used in an “effective and sustainable way” to fund further and higher education.
The Department of Health has been allocated a total package of €22.5bn next year. However, much of this will be required to maintain the current level of services.
It comes as the HSE is expected to overspend by at least €1.1bn this year, which was the subject of significant tensions within Government in the lead-up to today's budget announcement.
Mr Donohoe told the Dáil that "just as housing has been a challenge for our society that we are rising to, so the last three-and-a-half years have been a period of extraordinary challenges for our health service."
In his address, Mr Donohoe said the Government was committed to reducing waiting lists and improving access to community diagnosis, however, there was little in the way of specific measures.
The health allocation, he said, includes an additional €808m in core funding to address "demographic and service pressures" and non-core funding of more than €1bn.
Out of this, €38.8m will be allocated to fund extra staff for beds across acute and community settings and the development of surgical hubs in 2024.
A further €40.3m will go towards workforce reforms, including increasing consultant numbers, more GP training places and more advanced nurse practitioners.
An extra €7.5m will be allocated to the expansion and continued development of "better services" including CAMHS, new-born screening and health and wellbeing initiatives.
Two long-term funds are to be set up to put corporation taxes aside for future measures across health, pensions and climate change.
Mr McGrath told the Dáil that surpluses in the coming years will provide an "opportunity to prepare now for the challenges we know are on the horizon".
He said his Department now estimates that the "windfall" corporation tax receipts stand at around €10bn to €12bn.
The first fund will be called the Future Ireland Fund, which Mr McGrath has stressed is "not a rainy-day fund, because it is for costs that we know are coming our way in the years ahead."
Annually, the Government will invest 0.8% of GDP into this fund between 2024 and 2035, with €4.3bn being put in next year alone.
He said this fund will help meet the costs of running the State in the future, including in the areas of healthcare, pensions, home care and more.
"We know we are facing considerable costs in relation to an ageing population, age-related spending will be around €7bn to €8bn higher by the end of this decade," he has told the Dáil.
The second fund, which will be called the Infrastructure, Climate and Nature Fund, will see a €2bn contribution from the dissolution of the National Reserve Fund next year.
The fund will have a climate and nature component worth over €3bn, the aim of which is to help the achievement of carbon budgets through capital projects.
He said that this fund will grow incrementally by €2bn for seven consecutive years when it will reach €14bn plus interest accrued.
Mr McGrath also told the Dáil that the budget included a package of "wide-ranging measures to support Irish enterprise" which, he said, "will make a very positive difference."
Among the measures included are:
- The Research and Development (R&D) Tax Credit is being increased from 25% to 30%;
- The first-year payment threshold is being doubled from €25,000 to €50,000;
- A new capital gains tax relief for angel investors which will allow these investors to benefit from a reduced rate of Capital Gains Tax when they dispose of a qualifying investment;
- And a €250m package of temporary supports to support businesses through current challenges associated with cost-of-living pressures.
Mr Donohoe also announced an allocation of an extra €35m to the Department of Enterprise, Trade and Employment.
He said that this additional €35m, in conjunction with the existing resources available to the department, would allow for the following measures:
- €9m to local enterprise offices - the hubs for enterprise creation and business start-ups in local towns and communities;
- €3m for the digital services coordinator to support enforcement of the digital services act;
- And an increase in the IDA’s capital allocation of €27m to accelerate its Regional Property Grants Programme.
Mr McGrath said that he will be publishing legislation in next week's Finance Bill to implement the 15% minimum effective tax rate for large companies as provided for under the OECD Pillar Two agreement.
"This is a once-in-a-generation reform to our corporation tax system, and marks the culmination of a ten-year, global project to reform the taxation of multi-national enterprises," he said.
As regards issues targeted towards climate change, Mr McGrath said there will be a €7.50 increase on the current rate of Carbon Tax applied per tonne of carbon dioxide emission, bringing the rate up to €56 per tonne.
He said the Carbon tax will increase by the same amount in every budget until 2029.
He also said the increase will be applied to petrol and diesel from midnight tonight and all other fuels from May 1, 2025.
Additionally, he announced that he will be extending the accelerated capital allowances scheme for energy efficient equipment for a further two years.
He said he would be doubling the tax disregard in respect of personal income received by households who sell residual electricity from micro-generation back to the national grid.
From January, an income disregard of up to €400 per year will apply to profits or gains arising to qualifying persons from the micro-generation of electricity.
Mr McGrath also announced an extension to the VAT rate on the supply and installation of solar panels to schools with effect from January, as well as the extension of VRT relief for battery electric vehicles for a further two years to the end of 2025. This relief applies to battery electric vehicles with a value of up to €50,000.
People up to the age of 25 will be able to access Young Adult Leap cards, along with a retention of the 20% discount to public transport fees.
Budget 2024 also calls for additional investment in the BusConnects, the Cork Commuter Rail, Dart Plus and Metrolink projects, as well as the ongoing replacement of buses and trains and the construction of a National Train Control Centre.
An additional €27m has been allocated to "provide high-quality transport services", while an additional €4m will be put to providing emergency transport services for those fleeing Ukraine.
As regards roads, the budget documents single out the N22 Ballyvourney to Macroom, Dunkettle Interchange, M50 Traffic Control upgrade and N5 Ballaghaderreen to Scramoge roads as needing continued investment as well as additional funding for electric vehicles. Rural Transport Local Link services will be given an additional €2m.
A further €5.8m is pledged to transition the Coast Guard to its new contract. This will include an expansion of the aviation services of the Coast Guard, with two planes based at Shannon Airport set to provide search and rescue support.
There will be an extension of the fee waiver on school transport services and an extension of the fee waiver for students sitting state exams.
In the Justice portfolio, Helen McEntee has been given an overall budget of €3.5bn for 2024, with €274m, of that aimed at capital projects.
This will see €2.3bn spent on An Garda Síochána, with an increase in the Garda Trainee Allowance to €305 a week with the aim of recruiting a further 1,000 trainee gardaí to "prioritise visible policing in both rural and urban communities".
The budget also outlines plans to recruit 250 additional civilian staff to An Garda Síochána to "fill valuable roles from ICT to scene of crime duties and to perform administrative and back-office functions" which will allow trained gardaí return to policing, as well as a 24% increase in the Garda overtime budget including €10m in non-core funding.
There will also be funding for new equipment for gardaí and road safety policing and the expansion of the Garda Canine Unit.
In prisons, €12.4m will invested in payroll to "respond to increasing prisoner numbers" and €9.25m will be spent to establish agencies covering gambling, domestic violence, the Police Ombudsman and Office of the Independent Examiner.
A further €34 million will be made available to expand processing output and improve turnaround times for those seeking international protection.
The Department of Defence will receive an additional €6m to recruit new soldiers and to pay for their training. A further €34m has been ringfenced for additional capital investment and €15m to meet the pension costs of those Defence Forces members due to retire in 2024.
Budget 2024 also allows for an additional €4m to be made available for Irish consulates across the globe to find permanent accommodation.
The newest missions in Frankfurt, Lyon, Manchester, Manila, Miami, Rabat and Toronto are identified by the Department of Foreign Affairs (DFA) as potential uses of the extra money, with additional plans to renew and maintain existing embassies.
The DFA also allocated an additional €1.5m to support community groups servicing the Irish diaspora, with €1m for a new funding scheme for projects in those countries aiming to join the EU.
Ireland will also spend an additional €30m on "international cooperation".
This will be spent on programmes aimed at assisting countries which have experienced food shortages due to the war in Ukraine and enhanced humanitarian assistance in Ukraine itself.
The DFA will spend an additional €2m on the Reconciliation Fund to help "during this time of continued volatility and uncertainty in Northern Ireland".
In his address, Mr Donohoe also confirmed that there would be supports in the upcoming budget for the tourism, arts and culture sectors.
In particular, €368m is to be provided to support the Arts Council, the audio visual industry and towards Culture Ireland to help promote Irish creatives overseas.
On sport, Mr McGrath said that there needed to be more tax reliefs provided to both sporting organisations and charities, particularly for the development or redevelopment of their facilities.
“I intend to examine how the tax system can be utilized to further support these organisations with the upgrade of their facilities or the development of new ones,” Mr McGrath said.
He said that work on this would be concluded by next year.
Mr Donohoe said that €183m would be allocated to help increase female participation in sport, with some of the funding also going towards high performance athletes and sporting governing bodies.
An additional €100m is set to go towards Irish language support schemes and cross-border cooperation through An Foras Teanga.
Additional funding is set to be provided to TG4, Mr Donohoe confirmed.
Mr McGrath confirmed that there would be an increase to the Section 481 Film Tax Credit for production companies, following what he described as the “huge success” of Ireland’s audio-visual sector in recent years.
The tax relief will increase from €70m to €125m, subject to State aid approval.
“This will support the continuing development of a robust and creative film sector in Ireland,” Mr McGrath said.
Concluding his speech in Leinster House this afternoon, Mr McGrath said the country had much to be thankful for, namely, "full employment, a growing economy, budget surpluses, a national debt that is falling, and a population that is rising."
He said Budget 2024 provided help to households and businesses, and reaffirmed the commitment to quality public services.
"We face challenges for sure, but we face them from a position of strength, and we face them together."
CONNECT WITH US TODAY
Be the first to know the latest news and updates
