Budget 2022: Minimum wage increase, income tax changes and rise in welfare rates announced

Adults aged 19-23 to get 50% public transport discount, minimum wage to rise by 30c

The main points from Minister for Finance Paschal Donohoe's Budget 2022 speech. Video: Oireachtas TV


The Government has unveiled a multi-billion-euro Budget 2022 package aimed at reducing the cost of living for families, older people, workers and younger people while temporarily extending key lifelines for businesses.

Announcing a €4.7 billion package of new spending measures, the Minister for Public Expenditure and reform Michael McGrath said that Budget 2022 was “anchored in a conviction that we can take the learnings from Covid-19 and help to build a country with a better quality of life for our people”.

The headline measures include: an across-the-board €5 increase in welfare payments from January; a €5 increase in the fuel allowance from midnight on Wednesday; a full payment of the Christmas bonus; €520 million in income tax reductions; an increase in carbon tax by €7.50 per tonne to €41; nearly 1000 extra teachers and 800 extra gardaí; an extension of free GP care for children up to the age of eight; an extension of the State’s business support Employment Wage Subsidy Scheme (EWSS); an extension of the 9 per cent VAT rate; 50 cent on a pack of cigarettes; and a €4 billion Covid contingency fund.

Speaking in the Dáil chamber on Tuesday, Minister for Finance Paschal Donohue said: “In framing this budget, we have been conscious of the cost of living pressures that are currently confronting citizens and businesses . . . Budget 2022 meets the twin goals of investing in our future, of meeting the needs of today, while putting the public finances on a sustainable path.”

                       Budget 2022 main points: What’s in it for you?

Main points

Transport and minimum wage

A series of new measures were unveiled in the Dáil that will primarily benefit younger people including a 50 per cent reduction on public transport for young adults between the age of 19 and 23. As well as this, €1.4 billion is being allocated to improve public transport infrastructure.

The maintenance grant for third-level students will be increased by €200, the qualifying income thresholds will be expanded by €1,000 and the distance for the higher non-adjacent grant will be reduced from 45km to 30km.

The Government also announced that it will be reducing the number of contributions needed to qualify for treatment benefits from 260 to 39 weeks for people aged 25-28.

The national minimum wage will increase by 30 cent to €10.50 per hour.

To ensure the salary of a full-time worker on the minimum wage will remain outside the top rates of the Universal Social Charge (USC), the ceiling of the second USC rate band will be increased from €20,687 to €21,295.

Families also stand to make gains from Budget 2022 as the Government has pledged to invest €716 million in childcare next year.

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Mr McGrath pledged that Budget 2022 would mark “a turning point in the State’s approach to the early years and childcare sector”.

The universal childcare subsidy will be expanded to children under 15 from September of next year, in a move which will benefit up to 40,000 children at a cost of €5 million.

The practice of deducting hours spent in pre-school or school from the entitlement to State subsidised hours will be stopped, which will benefit an estimated 5,000 children.


In welfare, the qualified children rate will rise by €2 for those under the age of 12 and by €3 for those above that age.

Parent’s benefit will rise by two weeks to seven weeks from July of next year and from June of 2022 the back-to-school clothing and footwear allowance will increase by €10. The income threshold for the working family payment will also increase by €10 for all families.

The domiciliary care allowance will be expanded, so that it can be paid for children in hospital up to six months instead of three. As part of the across the board €5 welfare hikes, maternity benefit and parental leave payments will be increased.

In terms of personal taxation, a €520 million package was unveiled which will increase the standard rate band by €1,500. The personal tax credit, employee tax credit and earned income credit will all rise by €50.

For remote workers, there will be an income tax deduction amounting to 30 per cent of vouched expenses for heat, electricity and broadband incurred while working from home.

For businesses, Mr Donohue said that the EWSS will remain in place in a “graduated” form until the end of April next year.

“That is six months after the lifting of most public health restrictions and two months after the PUP ceases,” he said.

Throughout December, January and February, a two-rate structure of €151.50 and €203 will apply. For the final two months of the scheme – March and April – a flat rate subsidy of €100 will be put in place. The reduced rate of Employers’ PRSI will no longer apply for these two months. The scheme will close to new employers from January.

The reduced VAT rate of 9 per cent for the hospitality sector will remain in place to the end of August 2022. Chief executive of the Restaurants Association of Ireland, Adrian Cummins, said Budget 2022 was a “disaster for our members, restaurants, cafes and gastropubs, a vital element of our Tourism offering”.

He said: “The VAT rate ending, and wage supports tapering off will be the death nail in the coffin of many hospitality businesses this winter.”

Carers and housing

Besides the €5 payments, thousands more carers will be in line to receive Carer’s Allowance thanks to a change in the means test, the first such change in 14 years. Furthermore, a single person will be allowed to earn €350 and a couple €750 per week and still qualify for the same payment.

Mr Donohoe said housing was a core, “if not the core”, challenge facing the country over the next number of years.

The Government announced the extension of the help to buy scheme in its current form for another year.

A new 3 per cent zoned land tax, based on the market price of the land, was announced to encourage building. Landlords will also be allowed relief for pre-letting expenses for a further three years. Some €174 million for supporting the direct delivery of over 4,000 affordable homes next year, Mr McGrath said.

The National Women’s Council has welcomed the announcement that there will be a dedicated women’s health package worth €31 million. This will include access to free contraception for women aged 17-25 from next August, funding for period poverty and additional funding for sexual assault treatment units amongst other measures.

‘Missed opportunity’

Solidarity TD Mick Barry claimed that after the budget that “the rich will stay rich, the poor will stay poor” while Patricia King of the Irish Congress of Trade Unions expressed surprise at such “regressive” measures with regard to tax bands.

Labour housing spokesperson Rebecca Moynihan said Budget 2022 was a “missed opportunity” to tackle systemic issues in the housing market and confront the rental crisis head on.

“Renters remain relegated to second class citizens. Nothing will be done to tackle unaffordable rents. Too many people are struggling to pay high rents, or simply can’t find an affordable place to live. There are tax breaks for landlords in the budget but nothing for renters,” said Ms Moynihan.

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