Budget families: How they were affected
We look at how Budget 2016 changed people's financial experiences across Ireland
Choose your family
It may have been touted as a pre-election "giveaway" budget in some quarters, but as the experiences of our Budget families clearly shows, the benefits -while welcome - are nonetheless moderate and no-one will be running out to book that cruise or trip around the world with their savings, just yet.
The reduction in all universal social charge (USC) rates up to an income limit of €70,000 is likely to have the biggest impact on most people’s wallets.
Our single parent earning €30,000 for example, will see their annual USC charge fall by €300 a year, while our civil partners will pay €902 less a year.
Our pensioners for example, will benefit from a €3/week increase to their state pension, as well as benefiting from the reinstatement of the full Christmas bonus. This will top up their coffers by an additional €327, while the proportion of USC they pay on their private pension will also fall, down from €600 to €480 a year.
There was little of direct relevance to public sector workers, but they will also see their income rise thanks to the reduction in USC. Our nurse for example, is earning €37,000 a year, and will save €34 a month, or €408 a year, thanks to the change.
But what about our self-employed earners?
While it had been flagged ahead of the Budget that efforts would be taken to equalise the tax system between people who are self-employed, and those who pay tax under the PAYE system, the changes were not as significant as had been hoped. Indeed the major change was the introduction of a €550 tax credit on earned income - significantly less than the €1,650 credit those paying tax via PAYE currently enjoy.
Nonetheless, the self-employed person in our study, Sam, will still see his income rise by €121 a month. Of course as he files tax returns in the year subsequent to when he earns it, he’ll have to wait until 2016 to benefit from this change.
But it’s not all about income tax.
As has been highlighted in other pages, the Budget was particularly family friendly. Indeed the increase in child benefit, and the extension of the free pre-school year, will mean a lot to families struggling to cope with the cost of childcare, while allowing children up to the age of 12 enjoy free GP care from next year will also help.
And, the increase in the inheritance tax threshold to €280,000 may offer comfort to parents, such as our pensioners, who are fearful of leaving their children with sizeable capital acquisitions tax bills when they die.
Self employed, married with rental income
Sam is married, in his early 60s and lives in the Dublin suburbs with his wife Rachel. Sam is a self-employed IT contractor.
He has three children, two of whom are attending university. Sam has taxable income of € 177,125 per annum (which includes net rental income.)
Sam is delighted to hear that the government have introduced tax measures which will bring the self-employed more in line with that of PAYE workers. Such measures will see Sam benefiting from an increased tax credit for self-employed individuals.
Taking the above change into account, Sam expects to be better off by € 121 per month in 2016 when compared to 2015.
Dual income couple
Megan and Arthur are in their late thirties and live in Galway with their daughter, Emily, aged 8. Arthur works as a recruitment agent and earns an annual salary of €75,000. Megan runs a crèche and has an annual income of € 45,000.
The couple see the increase in child benefit payments as positive news, as is the extension of free GP care to children up to the age of 12. They are also happy that the local property tax will not be increased until at least 2019.
Arthur & Megan are happy that, as a result of today’s budget, their combined monthly net take home pay will increase by €119 when compared to 2015.
Cleo is a single person in her early 30s living in rented accommodation in Galway. She works in a city centre restaurant and is generally paid at minimum wage rates. Her earnings are € 19,000 a year.
Cleo is happy to hear that the minimum wage is going to increase as a result of today’s budget. She is also hoping to get additional shifts at the restaurant as she has noticed an increase in business over the last 12 months.
However, Cleo is worried that her landlord is going to increase her rent in 2016 given the media reports she heard about rental inflation in the Galway market this year. Cleo is concerned that an increase in rent, together with the phasing out of the rental tax credit, is going to significantly impact upon her.
Nevertheless, she is happy to hear that USC changes in the budget will mean an additional take home pay of € 50 for her per month in 2016.
Single public sector worker
Amelia is single and 30 years old and has been living in an apartment she bought in Kildare. She works as a nurse in Dublin and has maintained taxable income of €37,000 over the last number of years.
Amelia has decided her new year’s resolution will be to give up smoking - a decision influenced by today’s announcement that the price of cigarettes is to increase by 50 cent.
Amelia is relieved to hear that the local property tax (LPT) revaluation date has been postponed to 2019 which means she will not face an increase in LPT in 2017. This is welcome news considering that property values have increased in Kildare in recent years.
As a result of today’s budget, Amelia will see an increase in her monthly take home pay of €34.
Colleen and Alanna have been living as a couple for over ten years and live in South Dublin with their two children, aged seven and nine. They formally celebrated and registered their civil partnership in January 2011, following the passing of the Civil Partnership Act.
Colleen works as an accountant earning €90,000. Alanna does not work outside the family home.
The couple are pleased to hear about the free GP scheme being extended to children under 12 and the €5 weekly increase in child benefit payments. The increase in the home carer credit to €1,000 is also a positive result for them, as is the reduction in USC rates.
Following today’s budget, they will be better off by €91 per month in 2016 as compared to 2015.
Jack and Bridie are married and living in Cork. They own their family home having paid off their mortgage. Jack and Bridie are in their late 70s. Jack has an occupational pension of €24,000 and also receives deposit interest & the State Contributory Pension. Bridie is in receipt of the State Contributory Pension. They both have medical cards.
Jack and Bridie are glad to hear of a number of announcements in today’s budget, which will positively impact on them as a couple. The first is that the old age pension will increase by €3 per week from 2016 onwards. The second relates to a reduction in the maximum rate of USC to 3 per cent, which they will pay on Jack’s occupational pension income.
The couple were also interested to hear that the inheritance tax threshold is increasing for children inheriting the family home. They have just one daughter who they had hoped would not be faced with a significant tax bill on a future inheritance.
The combined effect of the changes is that Jack and Bridie will be better off by €36 per month in 2016 when compared to 2015. In addition, they can look forward to an additional payment of about €327 as a result of the government’s intention to restore the Christmas bonus.
Single income family
Sarah and Sean are a single-income family living in Dublin in their family home with their two young children, twins aged 3. Sean is a computer programmer with a multi-national corporation and currently earns €57,500 per year, while Sarah stays at home to care for their children on a full-time basis.
They are happy that the Budget has recognised the role played by home carers and that the tax credit has been increased in the Budget. As Sarah is considering entering the work place in the near future, she is also glad that the qualifying income limit for the home carer credit has increased as it may allow her work more hours and retain the credit.
Following today’s Budget, Sean is taking home €75 more per month in 2016. They are happy with the increase to child benefit, which means an extra €10 per week for two children.
Single parent family
Stephanie is a single parent living with her parents and her son, aged three, in Portaoise. She is a legal secretary and earns €30,000 per year.
Stephanie is going to take home €25 more per month in 2016 compared to 2015, due to the changes in USC rates. She is also happy about the increase in child benefit.
The government’s extension under the ECCE scheme for free pre-school education for children aged between three and five is also of interest to Stephanie as her mother is no longer in a position to look after her son while Stephanie works.