Measures to benefit those on low and average wages

TAKE-HOME PAY:Taxpayers will share a personal tax package worth more than half a billion next year, after Minister for Finance Brian Cowen announced measures designed to keep low-income workers out of the tax net and to ensure that those on average earnings do not pay tax at the higher rate.

The first of five instalments in the Government's income tax agenda included increases of about 4 per cent in the personal tax credit, employee tax credit and standard rate tax band, in line with wage inflation, as well as the first increase in the home carer's tax credit in five years.

The personal tax credit was increased by €70 to €1,830 for single people and by €140 to €3,660 for married couples, while the PAYE employee tax credit will go up by €70 to €1,830.

Single workers will now pay tax at the standard rate of 20 per cent on the first €35,400 that they earn, up €1,400 from last year.

Two-income married couples will see their standard rate band increase by double this amount to €70,800.

The standard rate band for a single-income married couple increases by €1,400 to €44,400, a rise of 3.2 per cent.

But a 17 per cent jump in the home carer's tax credit, which increases by €130 to €900 next year, means it may be single-income married couples who notice the biggest difference as a result of Budget 2008.

Following the Minister's changes, a single person in 2008 will enter the tax net once they earn more than €18,300, compared to an entry point of €17,600 this year.

Mr Cowen's decision not to repeat last year's 1 per cent cut to the top rate of tax means that the biggest winners in the last budget, high-income earners, will see little change to their take-home pay in 2008.

But the Minister made only tiny changes to the PRSI regime, increasing the ceiling on the income on which workers must pay PRSI from €48,800 to €50,700.

It had been rumoured that Mr Cowen was going to lift this ceiling by a more substantial amount, which would have hit higher-income earners.

Other increases in tax credits that will improve the disposable incomes of the people who claim them are a €40 increase in the rent tax credit, which is now worth €400, and a €10 rise in the trade union subscription tax credit, which is now €70.

The age tax credit aimed at reducing the tax burden of people aged 65 and over was increased by €50 to €325 for a single person aged 65 and over, while the income tax exemption limits went up by €1,000 and €2,000 for a single and married couple respectively. Widowed people and widowed parents also received increases in tax credits.

Mr Cowen said that the changes to the income tax system would protect and enhance the incomes of workers and support those who find themselves in difficult circumstances or on fixed incomes.