Dublin: The Irish government is considering significant income tax changes in the upcoming budget, with plans to increase the income threshold at which the higher 40% rate of income tax applies. The proposal is expected to provide tax relief for thousands of workers as wages continue to rise alongside the cost of living.
Finance Minister Simon Harris has indicated that the current threshold is too low, meaning many ordinary earners are being pushed into the higher tax band sooner than intended.
At present, income above €44,000 is taxed at the higher rate of 40%. If the threshold is increased, employees earning the same salary would be able to keep a larger portion of their income taxed at the standard 20% rate, allowing them to retain more of any pay rises, promotions or overtime earnings.
The higher-rate tax threshold has already increased from approximately €33,000 in 2015 to €44,000 today. However, the Government believes further adjustments are necessary to reflect rising wages and the increasing cost of living.
The minister said the government intends to include a personal income tax package in this year’s budget, although the scale and final details will be determined in the coming weeks. Greater clarity on the available fiscal space is expected when the Summer Economic Statement is published later this month.
Alongside income tax reforms, the government is also reviewing inheritance tax thresholds amid concerns that existing limits are placing financial pressure on families. The issue has been discussed by the leadership of both Fianna Fáil and Fine Gael.
Other measures under consideration for the new budget include expanded childcare supports, initiatives to encourage savings and investment, and additional funding to help households transition away from fossil fuels.
Minister Harris also indicated that the government is examining the possibility of introducing earnings-related maternity benefits in the future. He said people who contribute to the social insurance system through PRSI should receive benefits that more closely reflect their contributions during key stages of life.
The government has also welcomed the recent introduction of paid leave for pregnancy loss, signalling its intention to continue strengthening supports for families and working parents.
While the final budget measures will not be announced until October, the proposal to raise the 40% income tax threshold is expected to be one of the most significant tax relief measures under consideration, offering welcome support to middle-income workers across Ireland.
Irish Samachar English