What do families want in the Budget?

While Brian Cowen may not lower the top income rate to 40 per cent, taxpayers may reduce their liability with a range of tax credits, writes Laura Slattery.

The lobby groups have had their say, the heads of Government departments have done their pleading and the words "tight budget" have circulated ominously. But most people only want to know one thing about Budget 2008: what's in it for them.

Minister for Finance Brian Cowen will reveal all next Wednesday at 3.45pm, when he addresses the Dáil. The contents of that speech will affect the income, spending power and life choices of almost everyone in the State.

But what are the trigger words that people should keep their ears open for?

The panel below runs through the main tax rates, bands, credits and reliefs that currently turn workers' gross salaries into more modest net ones, as well as showing the main rates for common social welfare payments.

The case studies on this page, posed by models, have been compiled by accountancy firm PricewaterhouseCoopers on behalf of The Irish Times. They outline how the Government's tinkering of social welfare benefits and tax rates, bands, reliefs and credits could either dent or boost their finances.

In last year's budget, Mr Cowen reduced the top rate of income tax from 42 per cent to 41 per cent and hinted that, should our economic success story continue, he would reduce the rate to a nice round 40 per cent this year.

However, as economic growth slowed by more than the Government expected this year, the Minister has indicated that this reduction will now not happen.

All is not lost for taxpayers, however, as there is still likely to be increases to the standard rate tax band and personal tax credits. These should, at least, ensure that the proportion of workers in the tax net and the 41 per cent tax bracket doesn't creep up purely because of increases in the average industrial wage.

If the standard rate tax band isn't pushed up at the same rate as average pay increases, it amounts to a kind of stealth tax on workers.

Increasing the personal and PAYE tax credits also helps to reduce workers' annual tax burden. Tax credits are attractive and simple: a €100 increase in a tax credit equals €100 into the hands of the taxpayer.

At the moment, a single person will be taxed at the standard 20 per cent rate on the first €34,000 of their annual income. The balance is subject to the 41 per cent tax rate. So a single worker earning €50,000 will pay €6,800 tax on the first €34,000 they earn, and €6,560 on the €16,000 of their income that attracts the higher rate of tax.

The tax liability before any personal tax credits are applied is €13,360. Subtracting the personal tax credit, currently worth €1,760, and the PAYE tax credit, which was also worth €1,760 in 2007, means the total amount of income tax the worker will pay is €9,840.

If, for example, Mr Cowen was to increase the standard rate band by €2,000 to €36,000 and both the personal tax credit and the PAYE tax credits by €140 to €1,900 each, the worker's tax bill would fall to €9,140 - or €700 less than this year.

Workers can reduce their tax bills by using a variety of tax credits other than the personal and PAYE credits.

These include tax credits available on expenses such as rent, refuse charges and trade union subscriptions.

For people who aren't shy of filling in claim forms and have had the misfortune to have had health difficulties during the year, the medical expenses relief can prove valuable, as the relief is at the higher rate of tax.

For homeowners and househunters, last year's Budget was dominated by the changes made to mortgage interest relief for first-time buyers.

The maximum value of the relief doubled from €66 to €133 a month for a single person, helping borrowers to cope with interest rate increases.

Mr Cowen has said that he will increase the ceiling on the relief again in Budget 2008, so that its maximum value for a single borrower will be €166 a month.

However, the future for the hated transaction tax stamp duty, now paid only by second-time buyers, is considerably murkier.

• A calculator that allows people to work out how much Budget 2008 is worth to them will be available on ireland.com/focus/ budget2008