Personal tax: Home-carer tax credit increases by €190 to €1,000

The home-carer tax credit is to increase by €190 to €1,000 per year to help single-income married couples with children or who care for an elderly or incapacitated relative.

The income threshold up to which the home carer can earn has also been increased by €2,120 in Budget 2016 announced by Minister for Finance Michael Noonan.

He said the measure would help lower-income families by allowing the home carer to earn up to €7,200 and still benefit in full from the tax credit.

“These changes mean that every worker and every pensioner who currently pays income tax or USC, or both, will benefit from today’s Budget changes,” Mr Noonan said.

He noted that, taking account of the tax and expenditure measures, a one-income family with two children earning €35,000 would see its take-home increase by €57 a month. A single person, working full time on the minimum wage, earning €17,542, would see an increase of 4.2 per cent or €708 a year.

A family with three children with parents working as a Garda and a nurse earning €55,000 and €50,000 respectively would have an additional €196 per month in their pocket, Mr Noonan said.

Self-employed workers earning €40,000 will see a gain of €1,002 in their annual net income, an increase of 3.5 per cent.

Mr Noonan said the top 1 per cent of income earners would pay 22 per cent of all income tax and USC collected as a result of changes in the budget.

“In contrast, the bottom 75 per cent of income earners will pay 19 per cent of the total,” he added.

To eliminate anomalies in the PRSI system, Mr Noonan intends to introduce a tapered credit with a maximum level of €12 per week or €624 annually to “alleviate the step effect across a range of incomes”.

“This change will ensure that low income earners will see a significant improvement in net incomes,” he said.

For employer PRSI, he has increased the entry point to the top rate of 10.75 per cent by €20 per week to €376 per week. All of the PRSI changes will be brought forward in the social welfare bill.