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Your pay cheque will be bigger this month. Here’s why

As budget changes kick in, households will benefit from a reduction in income tax, an increase in the rent credit and welfare payments and another ‘Christmas’ bonus

People will have more money in their pockets after budget tax cuts and welfare increases kick in in the new year. Photograph: iStock

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Fiona Reddan
Tue Jan 9 2024 - 05:00

It may be January and your next pay cheque may be yet some weeks away but don’t despair (at least not too much), as there is some good news on the horizon.

Thanks to last October’s budget, there are a number of changes set to kick in this month, and in the weeks and months to come, which may boost your post-festive finances. The changes won’t be enough to be seen as generous but, as signalled at the time, there was “something for everybody” in last year’s budget, which means that everyone should benefit, at least to some extent.

At the time, it was estimated that taxpayers would save about €800 a year from income tax changes, while other measures, such as the increase in the rent credit and increased welfare payments, will also ease the pressure on households around the State.

So who’s going to benefit? And by how much?

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Income tax

Thanks to income tax cuts announced last year, most workers will get some benefit this month. The biggest change is the increase in the standard rate band, by €2,000 to €42,000. Straight away this gives savings of €400 a year for those paying tax at the higher rate.

Other changes include a €100 increase in the personal, PAYE and earned income tax credits, as well as changes to the universal social charge (USC).

It means, for example, that if you are a single earner with income of €25,000, you will have received €1,848 in your December payslip after tax but will get an additional €21, or €1,869 in total, in your January slip.

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Similarly, someone earning €65,000 will get an additional €71 this month, as more of their income will be liable to tax at the lower rate. A married couple, with one earner and an income of €100,000, will save an additional €81 from the tax net this month.

Unfortunately, however, the changes aren’t all going in one direction. Every PAYE worker will see their PRSI payments increase by 0.1 per cent from October next. It is expected that this will cost the average worker, on earnings of between €45,000 to €50,000, about €3.60 a month.

Renting

October’s budget increased the level at which the rent credit, first introduced in 2022, is paid to tenants from €500 to €750. This means an additional €20 or so a month that renters will get to keep from their pay cheque this year.

Moreover, the parents of students who are living in digs will be able to claim the credit for the first time this year, and that entitlement will also apply retrospectively for 2022 and 2023.

To benefit, you have to claim the credit by filing a tax return – it has been estimated that fewer than three-quarters of the 400,000 or so people eligible for the credit have claimed it thus far.

Homeowner

While there was strong support for the reintroduction of mortgage relief in the budget against a background of rising interest rates, the Government opted to bring it back only on a limited basis. An expected 160,000 homeowners or so will benefit from this measure this year.

To qualify, you must be seeking relief for your own home and the outstanding mortgage balance must have been between €80,000 and €500,000 at the end of 2022. Most importantly, you must be able to show that you paid more interest in 2023 than you did in 2022. You will be able to claim relief of 20 per cent on the difference.

Relief is capped at €1,250 per property. Revenue is expected to publish further details on the new scheme on its website over the coming weeks.

Landlord

Although the budget did introduce tax cuts for smaller landlords who commit to staying in the rental market until 2027 at least, there will be no real benefit felt this year. The reliefs don’t kick in until the 2024 tax year – and smaller landlords will only account for 2023 in tax returns they will file in October/November of this year (although it should make an impact to their preliminary tax payments for 2024).

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Thereafter, under the new rented residential relief, landlords will be able to set aside a fixed amount – €3,000 in 2024, rising to €4,000 in 2025 and €5,000 in 2026 and 2027 – that will be liable for income tax at the standard rate of 20 per cent rather than at the higher 40 per cent rate, although the universal social charge and PRSI will still apply. The measure will save landlords between €600 and €1,000 a year.

Welfare payments

A raft of welfare increases were announced in the budget. Many of these – such as the double child benefit payment, for example – kicked in late last year. However, there are still some to come.

On January 1st, for example, households will have received a second payment of €150 applied to their electricity bills, with one further payment due in March.

Meanwhile, if you get the top rate of the State pension, this also increased at the start of this month, up by €12 to €277.30, as did other social welfare benefits, including carer’s allowance (up to €248/week) and illness benefit (up to €232/week).

And, if you got a Christmas bonus, something that is paid under a host of welfare payments including the State pension and jobseeker’s allowance, you can also expect to get a new year’s bonus. This year, a second double payment for these benefits will be paid in the week starting January 29th, benefiting more than 1.3 million people.

If you have a child turning 18 after September who is going to remain in full-time education, you will also benefit from a payment of some €1,680 a year, as child benefit is going to be extended to 18-year olds, provided they are in full-time education. Previously, children aged 18 or over didn’t benefit.

Minimum wage

As was the case last year, workers aged 20 or above on the minimum wage will have seen a boost to their wage since the start of the month. Currently paid at a rate of €11.30 (the fifth highest in Europe), this increased by €1.40, or 12 per cent, to €12.70 from January 1st.

It means that someone working a 39-hour week will earn about €55 more a week, €220 more a month, and €2,640 a year.

The rates have also increased for those aged 19 (up from €10.17 to €11.43); 18 (up from €9.04 to €10.16); and under 18 (up from €7.91 to €8.89). It means that a 17-year-old working 10 hours a week will see an increase of almost €10 a week in their pay cheque.

In line with this increase, those eligible for the working family payment will also see this benefit rise, by €54 a week, effective from this month, to ensure that they don’t lose out due to the increase in the minimum wage.

Education

Parents with children in many secondary schools will also benefit from the introduction of free schoolbooks for all students entering first, second and third year this September. Expected to benefit some 210,000 students, it is estimated to be worth just more than €310 per student.

It builds on the introduction of free books for all primary school students in 2023. However, children attending one of the State’s 50 fee-paying secondary schools won’t benefit.

For college students, there will be another fall in the cost of the student registration fee for 2024. All students will benefit from a €1,000 reduction, bringing the cost down to €2,000. Families with incomes of between €62,000 and €100,000 will also benefit from a permanent cut of €500. This means that, for some students, the third-level registration fee will fall to €1,500.

And if your household earns less than €55,924, no student contribution will apply for September.

In addition, postgraduate students will once more be eligible for student maintenance grants, also from September.

And finally . . .

As of January 1st, the free contraception scheme has been extended to women aged 31, up from the previous age range of 17-30. The scheme covers the cost of a GP visit to discuss contraception, as well as any subsequent prescription. The cost of a range of different types of contraception, including the pill, IUDs and contraceptive injection are covered.

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