Budget 2024 families: Something for everyone in the audience

With tax savings of more than €2,000 a year on the cards for some households, Budget 2024 has, to paraphrase that Irish institution, “something for everyone in the audience”.

While a raft of increases were announced on the welfare side, income earners will also benefit when it comes to their tax bills, as the income tax package exceeded the expected €1.1 billion to give greater relief across the board.

It means that all of our families will get to keep more of their pay cheques next year, but some will benefit more than others. Whether or not it all turns out to be enough to cope with the ever-increasing cost of living remains to be seen.

At the lower end of the salary scale for example, Rebecca, who earns €22,000 a year, will benefit from a €345 annual bump (or €29 a month). She may also benefit from a salary increase next year, as the minimum wage is to rise by €1.40 an hour to €12.70.

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However, at the other of the income scale are our top earners, Mark and Linda, who have a combined income of €325,000. They will make an annual gain of more than €2,000 a year, or about €167 a month, thanks to budget day measures which include tax relief for landlords.

So what’s behind the savings?

Well, first up, households can expect increases in a range of tax credits from next January. These will benefit all of our families and include a €100 bump to the personal, PAYE, and earned income tax credits.

And, those paying tax at the higher rate – ie single earners earning €40,000 or more – will save an expected €400 a year, thanks to the decision to push the standard rate tax band up to €42,000. However, those close to earning the average wage, which now stands at about €47,000 for a single earner, will still see some of their income taxed at the higher 40 per cent rate.

For single-earning couples, this cut-off point will jump to €51,000, meaning that single-income families such as Jian and Sean, who have an income of €47,500, will be able to earn more without automatically jumping into the 40 per cent tax band.

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Households will also save on the universal social charge. As Katie O’Neill, a director with PwC points out, this is the first change to USC rates since 2016.

Lower-income workers will benefit from the increase in the 2 per cent USC band, which will move from €22,920 to €25,760. And the 4.5 per cent rate, which will now apply to income of between €25,760 to €70,044, will fall back to 4 per cent.

Families like Tom’s, who are renting, will be glad to see that they will get an extra €250 back in their pocket next year – at least for those who claim it, as latest estimates still suggest that as many as half of eligible tenants have yet to apply for it. As O’Neill says, this will offer “much needed relief”.

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Tom will also benefit from the €100 increase in the single person child care credit (there was a similar increase to the home carer credit), which means he will save some €663 on tax next year. As a potential homebuyer, the extension of the Help to Buy scheme to end-2025 may also help him.

Cash-strapped homeowners – particularly those on variable rates, or those whose fixed rate terms have recently come to an end – will likely get some relief through the reintroduction of the mortgage interest relief scheme.

It’s expected that some 160,000 households will benefit from the scheme, which will run for just one year. It will give relief of some 20 per cent on the difference of interest paid in 2022 compared to 2023, and is capped at €1,250 per property.

And it’s not just tenants. Amid the much-publicised departure of smaller landlords from the rental market, the Government has moved to try and retain their interest in being landlords.

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A temporary tax relief, which can be claimed for the years 2024-2028 (but thus won’t actually be claimed until November 2025 due to the tax return timetable), is said to be worth between €600-€1,000, and will rise each year. Landlords such as Mark and Linda, however, will have to hold on to their property at least until 2028 in order to benefit from this.

Pensioners will also benefit, both from an increase in income – the State pension will rise by €12 a week – as well as from tax changes.

Finally, it can’t all be good news: there will be an increase of 0.1 per cent to all PRSI contribution rates from October 1st, 2024. As O’Neill points out, “This will come as a cost to taxpayers.”

It means, for example, that our dual-income family, Ekene and Alison, on earnings of €175,000 a year, will pay an extra €44 in PRSI in 2024, while Tom, on earnings of €36,000 a year, will pay an additional €9 a year.

Single-income family: Jian & Sean

Annual gain: €511

Jian and Sean are in their late 30s. They live in Kilkenny in a four-bed semi-detached house. They have two children aged 13 and 7. Jian is a pilot. He gave up his job more than 10 years ago when their son was born and has now returned to work. Sean, who used to work full-time in a tech company now stays at home with their children. Their annual income is €47,500.

The couple also receive rent from renting out a room in their home and have boosted their income by €10,000 a year, thanks to the rent-a-room scheme. This is within the current tax-free limits of €14,000, so they receive this amount, tax free, on top of Jian’s salary.

Pensioners: Leslie and Kitty

Annual gain: €1,398

Leslie and Kitty are married and living in Cork. They own their family home, having paid off their mortgage. Leslie and Kitty are in their late 70s. Leslie receives an occupational pension of €22,000 along with the State contributory pension and deposit interest. Kitty also receives the State contributory pension.

Low income worker Rebecca

Annual gain: €345

Rebecca is 33 years old. She worked full-time as a waitress and moved out of her family home in 2019 to rent a one-bedroom apartment. She works as a customer service representative for an online retailer and she works remotely from home. Her annual earnings are €22,000 a year.

Single parent public sector worker: Tom

Annual gain: €663

Tom is 30 years old and a single parent. He lives and works in north County Dublin as a nurse. Tom earns €36,000 a year.

He is paying €1,000 for a two-bed apartment. However, he would like to get on the property ladder soon, and is hoping to use the Help to Buy scheme to help get his deposit together.

High earners: Mark & Linda

Annual gain: €2,259

Mark and Linda are in their early 40s with two children. They live in a €1.5 million four-bed detached house they own in Dún Laoghaire. Both Mark and Linda are accountants and earn a combined annual salary of €300,000, with both working from home a number of days each week.

They own a rental property that has an annual rental income of €25,000.

Dual income family: Ekene & Alison

Annual gain: €1,029

Ekene is married, in his 50s, and lives in Co Louth with his wife Linda. Ekene is a self-employed hotelier. Alison has a part-time job as a beautician and earns a salary of €23,000.

They have four children, two of whom now live at home. Ekene’s annual income over the last number of years was €152,000.