Budget winners and losers: Smokers and drivers hit; tax cut for earners on higher rate

Budget 2022: Donohoe says the package of measures to ease the cost of living is valued at €520m

Smokers who drive long distances and live in large homes are likely to be the main losers after this year’s budget, although almost everyone else looks set to be spared any tax increases or additional charges.

The big winners, by contrast, will be people who pay income tax at the highest rate while working from home with an electric vehicle parked in their driveway.

Older people on social welfare who rely on the fuel allowance to keep themselves warm through the winter, as well young adults who rely on public transport, are also set to do relatively well due to an increase in the pension, the fuel allowance and a significant discount on the cost of bus and rail tickets.

Minister for Finance Paschal Donohoe said the Government wanted to ease cost-of-living pressures through an income tax package which he valued at almost €520 million.

The standard rate band will increase by €1,500 which means people will not start paying the highest rate of income tax until they earn €36,800, compared with the current cut-off point of €35,300.

The personal tax credit, the employee tax credit and earned income credits will also rise by €50, while the ceiling for the second Universal Social Charge rate band will be increased from €20,687 to €21,295.

Mr Donohoe said these changes would benefit all workers earning in excess of that. All told, the taxation changes will see the income tax bill for those paying tax at the highest income tax rate fall by around €35 a month or more than €400 a year.

People who work from home are also in line for a tax break with the introduction of a credit which will equate to a discount of 30 per cent on energy bills for each day worked from home. Tánaiste Leo Varadkar said he expects the average level of support that will be claimed with regards to utility bills is around €220 per annum.

Wiped out

All of those potential savings will be wiped out for the nation’s smokers, however. As had been widely flagged, Donohoe has added a further 50 cent on to the price of a packet of 20 cigarettes, a move which will cost a 20-a-day smoker around €200 over the course of the next 12 months.

The Minister also confirmed a carbon tax increase which amounts to €7.50 per tonne. This will see the cost of a 60-litre tank of petrol climb by €1.28, while the cost of an equivalent tank of diesel will climb by €1.48, with both changes effective from midnight on budget day.

The increase will add around €60 to the tax on fuel paid by a motorist who drives around 30,000km a year.

Welfare payments will increase by €5, while the Christmas bonus will be paid in full to social welfare recipients and the fuel allowance will increase by €5.

The proposed 50 per cent reduction in public transport fares for young adults will see regular commuters save at least €250 a year.