Will you end up paying more tax after Budget 2020?
Smart Money: The five areas where your pocket could be hit
Time to fill up? A €10 increase in carbon taxes in Budget 2020 would add around €1.70 to a 60-litre petrol fill. Photograph: iStock
The Government only has €700 million in room for manoeuvre in Budget 2020, due for delivery early next month.Or at least this is what is available what might be called “normal” budget measures – the everyday fare of more spending and lower taxes. The Minister for Finance Paschal Donohoe has said he will borrow more for special Brexit measures – but warned there will be little relief elsewhere. But this is the last budget before a likely general election, and the Minister is likely to seek extra tax in some areas to pay for some tax cuts elsewhere and spending increases . So where is your pocket likely to be hit ?
1. Income tax
This may not seem to make sense. After all, we may get some limited PAYE relief – and taxes on income in most areas are not likely to rise. But there is a subtle point here which is often missed. If you are going to get a wage increase next year, then unless tax credits and the tax band which determines when you start paying at the higher 40 per cent rate is adjusted, you will end up paying a slightly higher proportion of your income in tax. You will still be better off in cash terms, but the exchequer will take a slightly higher slice of your income. This may not make much difference in one year – but it does over time. In economic jargon it is called fiscal drag.