Last Wednesday, we all sat tight as Finance Minister Michael McGrath announced his budget package for 2024. As has become the norm in recent years, much of the measures proposed in the Budget were released in the media well beforehand, so unforeseen surprises were few and far between. But what effect will the Budget have on the average Public Sector worker coming into 2024?
Cost of Living
First up in Minister McGrath’s announcement was a one-off Cost of Living package, which he says is the government’s reaction to this year’s increases in inflation and interest rates. The package includes;
- An energy credit of €450 across three instalments
- Renters credit up to €750 ( also available to parents of students)
- Temporary mortgage interest tax relief worth up to €1,250
- Half-price public transport for under-25s
- All social welfare rates to rise by €12
Although these measures are welcomed by those struggling with rising bills and mortgage repayments, what are the long-term effects of this Budget on today’s employees, and will it be enough?
Income Tax
The average tax paying employee is expected to be, on average, €800 better off thanks to cuts to the Universal Social Charge (USC) and amendments to the current income tax bands.
- The top income tax rate of 40% will increase by €2,000 to €42,000.
- PAYE tax credits and other related credits will increase by €100.
- The USC rate of 4.5% will drop to 4%, saving the average worker €235 a year.
- The ceiling for the 2% rate will go up by €2,800 –an additional €56 a year on average.
- PRSI rate will increase annually by 0.1% from October next year.
Rent and mortgages
For renters, the tax credit, currently at €500, is set to reach a new level of €750. This credit has now also been made available to parents of students in rented accommodation. It is a minor yet welcome relief for those supporting their sons and daughters through college.
Landlords will receive tax relief at the 20% standard rate on a proportion of their rental income. This would see rental income of €3,000 for 2024, €4,000 for 2025, and €5,000 for 2026 and 2027 disregarded at the standard rate – as long as landlords stay in the market for that full four-year period.
Mortgage interest tax relief has been introduced temporarily up to a max of €1,250. This will be available to those with an outstanding mortgage (on their principal dwelling) of between €80,000 and €500,000 at the end of 2022.
The big announcement for those looking to get on the property ladder is that the Help to Buy scheme has been extended to 2025. As Mortgage Advisors, we have seen this scheme help many First Time Buyers who were struggling to put together the considerable deposit needed on a new home. Applicants of the Local Authority mortgage scheme will now also be able to avail of Help to Buy.
Pensions
It was announced that people on the maximum rate of State Pension (Contributory) will get an increase of €12 per week from January 2024. There will be proportional increases for qualified adults and people on reduced rates of payment.
The pension age of 66 has been retained, however this comes at the cost of an annual 0.1% PRSI increase for workers.
Tax relief on pension contributions has not been touched, keeping in place the lucrative incentive to plan for your own retirement.
No changes were announced to the current Public Sector pension schemes.
Childcare & Education
- An average reduction of 25% in childcare fees was announced, however this will not be seen by parents until September 2024.
- Parents benefit will be extended to nine weeks from August 2024.
- Statutory foster care rate to rise by €75 per week for children under 12 and €73 for children over 12.
- The free school book scheme will be extended to the first three years of secondary school. Free copybooks and calculators are also among measures.
- There will be a once-off reduction in the 3rd-level student contribution fee of €1,000.
Despite there being no mention of Public Sector pay in Wednesday’s budget, Leo Varadkar did make the following statement as part of his speech the next day;
‘In the coming weeks, we also hope to finalise the terms of a new Public Sector Pay deal, which will be important for our public servants and also the ability of the public service to remain an attractive place to work in a tight labour market.’
Although the Building Momentum programme of the last two years has gone some way to restore the income of Public Sector employees, it certainly hasn’t accounted for the huge increase in the cost of living due to inflation.
A new Public Sector Pay deal would undoubtedly be welcomed, and we look forward to hearing the terms agreed upon on behalf of Ireland’s hardworking healthcare professionals, Civil Servants and Public Service staff.
All statements and figures referenced can be found at
https://www.gov.ie/en/publication/a93a4-your-guide-to-budget-2024/
Written by,
Claire Hanrahan,
Managing Director.