Modest increases favour average family

FAMILY WELFARE:Single-income married couples who earn some €45,000, qualify for first-time buyer mortgage interest relief and the home carer's tax credit - and do not smoke - will be among those whose household incomes benefit most as a result of Budget 2008.

As part of a social welfare package worth a total of €900 million, people who receive welfare benefits will see their payments rise by 6-7 per cent, or by €12-€14 a week.

This increase is ahead of the rate of consumer price inflation, which is currently running at an annual rate of 4.8 per cent, but less generous than last year's 10-11 per cent rise in payments.

The main income tax credits and the standard rate tax band were increased by some 4 per cent, in line with wage inflation, as part of personal tax changes worth almost €600 million.

The €336 million in additional supports for older people included a €14 a week rise in the State pension for people with a record of PRSI contributions.

This pension is now worth €223.30, while the means-tested non-contributory pension will go up by €12 a week to €212.

In a move that will benefit many older women with little independent pension income, the weekly payment for qualified adults - in other words the spouse or partner of contributory pensioners - will increase by €27 to €200 a week.

Some €194 million more will be spent on supporting families with children.

A welfare-dependent family with three children, one of them under the age of six, will receive an increase of €718 in a full year, bringing their total child support to more than €12,000.

Child benefit payments will increase by €6 to €166 a month for the first and second child from next April.

The payment for the third and each subsequent qualifying child will increase by €8 to €203 a month.

Working parents will be supported by a €100 increase in the early childcare supplement for each child under six, taking this payment - first introduced two years ago - to €1,100 a year.

Parents who mind small children at home will benefit from a 17 per cent jump in the home carer's tax credit, which increases by €130 to €900 next year.

This credit was introduced in 2000, following a hostile reaction to the introduction of the "individualisation" of tax bands, a policy that uses the tax system to encourage more women to work outside the home.

The Government has committed to a doubling of this credit to €1,540 over its current term of office.

There was also a significant 50 per cent jump in the widowed parent grant, which is being increased by €2,000 to €6,000 with immediate effect.

Carers will receive a €200 rise in the respite care grant, which is now worth €1,700 a year, while carer's benefit and allowance payments increase by €14 a week.

Next year, single workers will pay tax at the standard rate of 20 per cent on the first €35,400 that they earn, before they move to the top rate of tax. This year, the higher 41 per cent rate kicked in at €34,000 for a single worker.

Dual-income married couples will see their standard rate band increase by double this amount to €70,800, while the standard rate band for a single-income married couple increases by €1,400 to €44,400.

The personal tax credit goes up by €70 to €1,830 for single people and by €140 to €3,660 for married couples, while the PAYE employee tax credit will rise by €70 to €1,830.

With average rents rising over the past year, tenants will welcome the €40 increase in the rent tax credit to €400 for people under the age of 55 and the €80 increase to €800 in the credit for tenants aged 55 and over.

But for mortgage borrowers who qualify for first-time buyer mortgage interest relief, it is the well-flagged increase in this relief that will account for the most noticeable chunk in their additional disposable cash next year - assuming that the credit is not wiped out by further interest rate hikes next year.

For a single borrower, the credit will increase by €33 a month to a maximum of €166, with the credit worth up to twice that amount for joint borrowers who also qualify as first-time buyers.

Overall, the increases in tax credits and bands mean that four out of five workers continue to pay tax at no more than 20 per cent, while two out of five earners remain outside the tax net.