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“Government Unveils Budget 2024 with Extensive Cost-of-Living Measures”

Budget 2023, titled ‘A Cost of Living Budget,’ has introduced a series of targeted measures to address the challenges posed by inflation and the rising cost of living. The tax package, unveiled by Minister for Finance Paschal Donohoe, offers several key benefits..

Individuals and households:

As extensively reported in the lead-up to the minister’s budget speech, one of the notable changes is the increase in the standard rate band to €40,000. This adjustment can result in a tax saving of up to €640 per individual, provided it is fully utilized. Complementing this, there is an approximate 4% increase in the main annual tax credits, as proposed in the Commission for Tax report. Additionally, the 2% Universal Social Charge (USC) band has been expanded to align with the increase in the minimum wage. These combined measures mean that the average middle-income family with two incomes can anticipate being €1,660 better off.

Starting from 2022, there is promising news for approximately 400,000 tenants who stand to benefit from the newly introduced Rental Tax Credit of €500 per year.

For landlords, the increase in pre-letting expenditure relief from €5,000 to €10,000 is a welcome change. Furthermore, the time limit for a property to remain vacant has been reduced to 6 months. This move is expected to incentivize the swift return of rental properties to the market.

To further support the housing market, the government has announced an extension of the Help to Buy scheme until the end of 2024.

The Small Benefit Exemption, which allows employers to offer non-cash tax-free benefits or vouchers to employees, has also seen improvements. The tax-free threshold has been raised to €1,000 per year, effective immediately. Additionally, it now permits the provision of two vouchers annually.

Cost of living

Minister for Finance, Michael McGrath, has proposed a 12-month extension of the reduced VAT rate of 9% for gas and electricity, offering consumers additional savings of €90 for electricity and €62 for gas.

Minister McGrath further announced that incremental increases of 8 cents per litre on petrol, 6 cents on diesel, and 3.4 cents on marked diesel will take effect in two equal installments, scheduled for April 1 and August 1 of the following year.

In an effort to assist households with energy bills during the winter months, Minister for Public Expenditure and Reform, Paschal Donohoe revealed a plan to provide three energy credits of €150 each. These credits will be disbursed in three stages, starting at the end of 2023 and concluding in April of the following year.

Additionally, a lump sum payment of €300 will be disbursed to recipients of the Fuel Allowance in the last quarter of the current year.

Mortgage Interest Tax Relief

Furthermore, a one-year Mortgage Interest Tax Relief has been confirmed for homeowners with outstanding mortgage balances ranging from €80,000 to €500,000, effective from December 31. This relief will apply to the increased interest payments made on the mortgage in 2023 compared to those in 2022, with a standard income tax rate of 20%. The relief is capped at €1,250 per property.

Social Welfare Updates:

1. Weekly Payment Increase: Weekly social protection payments will see an increase of €12, providing additional financial support to beneficiaries.

2. Qualified Child Increase: The Qualified Child Increase is set to rise by €4, reaching €46 per week for children under 12 years old and €54 per week for those aged 12 and over.

3. Living Alone Allowance: An extra €200 will be disbursed to individuals receiving the Living Alone Allowance, offering additional assistance to those living independently.

4. Christmas Bonus: The Christmas Bonus, traditionally given to recipients of regular Social Protection payments, will be distributed in early December, providing a boost to beneficiaries during the holiday season.

5. Cost of Living Support: In January, a one-time “Cost of Living Support” payment equivalent to two weeks’ worth of benefits will be granted to all eligible Social Protection recipients.

6. Special Payment: Before Christmas, a special one-time payment of €400 will be extended to beneficiaries of the Carer’s Support Grant, Disability Allowance, Blind Pension, Invalidity Pension, and Domiciliary Care Allowance.

7. Foster Care Allowance: Foster parents will receive a double payment of the Foster Care allowance this year, offering additional financial support to those providing care to vulnerable children.

Education:

A significant development in the education sector is the introduction of free school books for students in the first three years of secondary school. This initiative will benefit a substantial 770,000 students across both primary and secondary schools by providing them with free textbooks and workbooks.

For families with an income of less than €100,000, the college fees for undergraduate students will be reduced by half, bringing the fees down to €1,500. This measure is aimed at making higher education more accessible and affordable for eligible students.

Other families will also experience a reduction in college fees for full-time undergraduate students, with a decrease of €1,000. This change is expected to ease the financial burden on students and their families pursuing higher education.

The fee waivers for school transport services and for students sitting state exams will both be extended, offering continued financial relief to families and students.

Children:

Several key enhancements have been introduced in support of families with children. The home carer tax credit and the single-person child carer credit will see an increase of €100 each, providing additional tax relief to caregivers.

The incapacitated child tax credit is being raised by €200, further assisting families with children who have special needs.

Ahead of the Christmas season, a double payment of Child Payment will be issued to all qualifying households, totaling an extra €140 per child. This will provide additional financial support to families during the holiday period.

The National Childcare Scheme will undergo a 25% reduction in childcare costs, offering parents and guardians more affordable childcare options.

By the end of 2024, the statutory foster care rate will witness an increase of €75 per week for children under 12 and €73 per week for children over 12. This will raise the rates to €400 and €425 per week, respectively.

Climate:

A new Infrastructure, Climate, and Nature Fund will be established, with an annual growth of €2 billion for seven consecutive years, ultimately reaching €14 billion. This fund is dedicated to investments in infrastructure projects, climate initiatives, and conservation efforts.

The accelerated capital allowance scheme for energy-efficient equipment will be extended for an additional two years, encouraging the adoption of environmentally friendly technologies.

To promote micro-generation of electricity, the tax disregard for personal income from households selling surplus electricity back to the national grid will be doubled.

Starting January 1, 2024, the zero VAT rate on the supply and installation of solar panels will be extended to schools, encouraging the use of solar energy in educational institutions.

VRT relief for battery electric vehicles will be extended until the end of 2025, incentivizing the purchase of electric vehicles.

The rate per tonne of carbon dioxide emissions for petrol and diesel will increase from €48.50 to €56.00, following the trajectory outlined in the Finance Act 2020, promoting cleaner energy alternatives.

Justice and Defence:

A package of €172 million will be allocated to the justice sector, which includes funds for recruiting 1,000 gardaí and up to 250 garda civilian staff.

An additional €25 million will be added to the annual overtime budget for the gardaí.

The defence sector will receive funding of €1.23 billion in the next year. This funding aims to advance the “priority recommendations” of the Commission on the Defence Forces and the Independent Review Group, as well as support the recruitment of 400 additional military personnel.

Healthcare:

A total of €22.5 billion has been earmarked for the public health system, including an €808 million increase in core current funding. This funding boost is intended to address demographic changes and service pressures in the healthcare sector.

Over €1 billion in non-core resources will be allocated for spending on COVID-19 response efforts and support for Ukraine.

Cigarettes 

The excise duty on a packet of 20 cigarettes will be raised by 75 cents, resulting in a total price of €16.75 per pack.

Minister McGrath has proposed a domestic tax on e-cigarettes and vaping products in next year’s budget, aiming to regulate and tax these products within the domestic market.

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