The 2023 Budget – What does it mean for Employees
An unprecedented €11 billion budget package was set out in the 2023 Budget. It was framed as a ‘Cost of Living’ budget.
Some of the main benefits will not be noticed in our pockets until January 2023 including changes in taxation, cost of living supports, supports for energy costs, health, housing & education.
Let’s look at some of the key measures planned which could have an impact on your employees:
Reduction in Personal Tax
Likely the largest difference in employee net income.
- The standard rate tax band of 20% has been increased to €40,000 from €36,800 for a single individual.
This means you do not reach the higher tax band of 40% until your income reaches €40,000.
Meanwhile, couples can earn €80,000 before paying tax at the higher rate. This change will result in savings of €800 a year for those on the higher rate and up to €1,600 for a couple.
- The personal tax credit will increase by €75 for an individual and €150 for a married couple.
- The Home Carer Tax Credit has also been raised by €100
Universal Social Charge (USC) has been Reduced
- The Government is increasing the 2% Universal Social Charge (USC) Band – from €21,295 to €22,920. The purpose of USC is to provide a steady income to the Exchequer to provide funding for public services. USC is paid on our total gross income.
Example of how these changes would work in practice
Based on a Single person, age 45 on a salary of €45,000 with no dependents & no additional employer benefits:
| 2022 2023 |
| Gross salary €45,000 €45,000 |
| Tax payable €36,800 @ 20% €40,000 @ 20% |
| €8,200 @ 40% €5,000 @ 40% |
| Total tax liability €10,640 €10,000 |
| Minus personal tax credits €3,400 €3,550 |
| PRSI €1,800 €1,800 |
| USC €1,312 €1,272 |
| Annual Net Income €34,648 €35,478 |
Savings plans
- For those with savings plans in place, exit tax remains at 41% on any growth. tax is liable on any encashments – be that partial encashments or full encashments and/or on the 8th anniversary of the policy. In addition, the 1% Government Levy remains in place for these plans.
Child benefit and Education
- A once off double child benefit payment in November – this is for each child. That is €140 x 2 = €280
- there will be a Free School Book Scheme for primary school pupils from autumn 2023
- over 660 additional mainstream teachers, over 1,190 SNAs and 680 special education teachers will be provided
- the National Childcare Scheme hourly subsidy is to increase from 50c to €1.40
- there will be a €500 increase in post-graduate contribution grant for eligible families
- over 4,800 additional places on craft and consortia-led apprenticeships and 4,000 places on craft apprenticeship programmes will be supported
Cuts to college fees
- Students will benefit from a once-off €1,000 reduction in third-level fees in 2022.
- Families earning less than €100k will see a €500 reduction in fees.
- The income limit to qualify for a 50% reduction in contribution fees under SUSI will be increased from €55,240 to €62,000, and all SUSI maintenance grants will be increased by between 10 and 14% in September 2023.
- The Post-Graduate Fee Contribution Grant for eligible students of €3,500 will increase by €500 and the PhD stipend will increase too.
- Finally, the government is extending the 20% public transport fare reduction and the Youth Travel Card discount of 50% on all operators’ services to the end of 2023
Renters
- For the renters out there, €500 will be provided as a tax credit. The scheme is aimed at renters who do not qualify for other housing supports and has been backdated to account for rent paid in 2022
Mortgage seekers
- For those of you trying to get on the property ladder, the Help to Buy Scheme has been extended to the end of 2024.
So, our 2023 ‘Cost of Living’ Budget will result in Irish Workers seeing savings in their income tax, energy bills, rent and more.
