Overview

Ireland’s Budget 2024, ⁢to ​be announced next week, ⁤is⁢ unlikely to include any changes to personal ‍income tax ​bands or⁤ credits, according to ⁣sources familiar with teh ongoing discussions. This marks a departure⁢ from recent budgets which delivered tax reductions exceeding €1,000 for many ⁤workers. ⁤The‌ government’s fiscal space‌ is largely ⁤committed to measures addressing the cost of living, including⁣ potential VAT​ cuts ⁢and continuation of existing tax credits.

Limited Fiscal Space for⁤ Tax Changes

The current tax package, announced in July, is capped at €1.5 billion. ⁢ Sources indicate this allocation will not be expanded. ⁢ The ⁣existing commitments to other measures – a reduction in the Value Added Tax (VAT) for the hospitality sector, a‍ VAT reduction for ‍apartments, the continuation of​ the renters’ tax credit, and maintaining lower VAT⁣ rates⁤ for gas and ‍electricity – are consuming the available funds. As one source stated, ⁣”There is no space at all to do a personal tax​ package.” Irish Times

Without indexing income tax bands and credits to inflation, ⁣workers​ who receive pay ⁤increases will effectively pay a ⁢higher proportion of their income in tax. This is because the thresholds at which higher tax‍ rates​ kick ⁢in remain⁢ unchanged, meaning more income falls⁢ into those⁤ higher brackets. This contrasts ‌with recent budgets where adjustments to ⁣these thresholds and credits mitigated the impact of inflation and wage⁢ growth on tax liabilities.

Focus‌ on⁤ Cost of Living Relief

The ⁣government appears to be prioritizing measures designed to ‍alleviate the​ ongoing cost of living crisis. Key areas ‌of focus include:

• Hospitality VAT cut: A reduction in VAT ⁢for⁢ the hospitality sector is being⁣ considered to‍ support businesses and potentially lower prices for consumers.
• Apartment VAT Reduction: A lower VAT rate for apartments is also under discussion, ‍potentially incentivizing construction⁣ and‌ increasing housing‍ supply.
• Renters’ Tax Credit: The continuation of ‍the renters’ tax credit,introduced in previous budgets,is ⁤expected to provide ongoing‌ support to renters.
• Energy‍ VAT Rates: ​ Maintaining the lower VAT rate​ for gas and electricity is likely to⁢ continue, shielding ⁢consumers from‌ some of the⁤ impact of high⁢ energy prices.

Impact on⁢ Taxpayers

The⁢ absence of income tax cuts will disproportionately affect ⁢middle-income ⁤earners ​who have ‍experienced wage increases. While these increases are welcome, a larger portion of that additional income will be subject⁤ to taxation. The⁤ following table illustrates a simplified‍ example: