It was billed as the biggest bonanza budget in the history of the State and in some respects, it has lived up to that billing.
Many people will be substantially better off over the next 12 months as a result of the tax changes and cost-of-living measures announced by Minister for Finance Jack Chambers.
Double-income households earning more than €50,000 each with three children will benefit most in cold hard cash terms. The tax changes alone are set to help the better-off by more than €1,500 a year with the one-off child benefit boosts adding an additional €840 to their coffers.
But that is the starting position and when other elements of the budget are totted up, there will be many households with well over €2,000 more to spend in 2025 than they did in the year just past. Here are the main elements that will should make an obvious difference:
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1. Income tax
The most significant savings for most people will come as a result of well-flagged income tax changes which will mean people paying the highest rate of tax of 40 per cent at €44,000 instead of €42,000. That move will save many middle-income earners who pay a significant portion of their tax at the higher rate in the region of €400 throughout 2025 — a figure which can be doubled for the two-income household.
2. Tax credits
Tax credits are being enhanced too with the personal tax credit climbing by €125, a move which will benefit a couple by €250. Other tax credits including the home-carer credit, the single-person child carer and the incapacitated child tax credit are also increasing by varying amounts.
3. Universal Social Charge
The 4 per cent Universal Social Charge rate will become a 3 per cent rate with the entry point rising to €27,382, a move which will be worth in the region of €300 annually to many middle-income earners or closer to €600 for the two-income household.
4. Cost-of-living measures
Away from the tax net, cost-of-living measures will also mean many people are considerably better off with the two universal energy credits to be rolled out late this year and early in 2025 worth €250 to affected households. While the credits are €200 less than what was on the table in the last budget, they come in the context of falling energy prices with multiple price cuts rolled out by all providers seeing many domestic bills falling by close to €1,000 over the last 12 months. It is also worth noting that increased network charges and higher energy-related levies will erode a significant portion of the €250 worth of energy credits if they are passed on by providers — Electric Ireland has already announced it plans to absorb the network charges for its electricity customers.
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5. Child benefit
Two double payments of the child benefit before Christmas will be worth €280 per qualifying child, meaning a family with three children will benefit to the tune of €840 between now and Christmas.
6. Newborn baby boost
Parents with babies due around the new year will have a greater incentive than ever to have the first baby of 2025 – or at least not have the last baby of the old year. As from the beginning of next year, there will be a baby boost payment of €420 for new parents with those who give birth towards the end of December set to miss out on the cash payment although in the grand scheme of things, that should not matter too much,
7. Welfare payments
The Minister for Finance also confirmed that all welfare payments, including pensions, are to increase by €12 per week. That will amount to an annual increase of more than €600 for recipients. An October bonus double payment for recipients of long-term social protection payments was also announced while there will also be a double payment in time for Christmas.
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8. Minimum wage
The minimum wage is going to increase by 80 cent per hour to €13.50 in a move which will mean the annual salary of someone paid at that rate climbs by about €1,500.
9. One-off lump sum payments
A €400 lump sum payment will be given to Working Family Payment recipients while those receiving the fuel allowance will get €300 next month with a €200 payment for recipients of the living alone allowance.
10. Rent tax credit
The rent tax credit is to rise by €250, to €1,000 and €2,000 for a jointly assessed couple for 2025 while mortgage interest relief and help-to-buy schemes are to be extended.
So that is all good news for Irish consumers. And using the Coalition’s carefully constructed narrative many Irish households will be substantially better off next year.
That is undoubtedly true but, as with so many things, context is key and even with the changes people will still be poorer than they were even three years ago as a result of an enduring cost-of-living crisis
The single biggest cost faced by most people is keeping a roof over their heads. And while interest rates are falling, the cost of home loans is still substantially higher with many people down thousands of euro each year.
The story is no better for renters, with recent Residential Tenancies Board figures suggesting average rents have increased 8.1 per cent for new tenancies and 5.9 per cent for existing ones over the last year, a fact that puts the €250 renters’ credit in context.
The next big expense for most people is food. And while the annual rate at which grocery prices are climbing has steadied at less than 3 per cent, almost everything on our supermarket shelves costs more than three years ago.
If a household spent €200 a week on groceries in 2021 they might be spending €230 now, which equates to an annual increase of €1,560, a figure that all but wipes out the tax changes announced in the budget.
The energy credits, meanwhile, are dwarfed by the higher price of domestic gas and electricity. Granted it has fallen from about €4,000 to €3,200 but in 2021 that figure was about €2,000, so households are €1,200 poorer, with prices unlikely to fall much further in the months ahead.
At the end of his speech, Mr Chambers quoted Micheál O’Muircheartaigh when he urged people to keep hoping. “As elected representatives, I believe it is our responsibility and duty to foster a real sense of hope for the future,” he said.
And maybe all consumers can do now is hope, hope that the budget measures will be enough to make a difference in the months ahead and hope that the pre-election largesse will not be looked back on in time as we came to view the overly generous budgets of the Celtic Tiger years.
