Yesterday saw the beginning of budget season with the Ireland budget 2019 . There are many changes coming down the road that are likely to impact your people and their family’s finances, as well as the employee benefits that you will need to provide for them.
The Nudge community in Ireland have received personalised ‘nudges’ outlining how these changes impact their own personal circumstances, but here we’ll summarise the headline news.
Budget 2019 brings changes to the tax your people will pay on various things – from the money they earn to a meal out – as well as greater help for parents.
There are several changes to income tax and the Universal Social Charge from January 2019:
- The third rate of USC will be reduced from 4.75% to 5%
- The ceiling for the second rate income band will increase by €502 to €19,874
- The threshold between the flat rate and higher rate of tax is increasing by €750
There will also be a rise for two types of tax credit: home carer tax credit by €300 and earned income credit by €200.
More Help for Parents
There are several other child and parent-friendly changes for every stage of life ahead.
An extra two week period of paid parental leave will be offered to each parent of a child under one year old from November 2019, with plans to gradually increase that to seven weeks. This will be in addition to Maternity and Paternity Benefits.
The income thresholds for the Affordable Childcare Scheme which is due to be introduced next year to take care of kids up to the age of 15 will go up. The maximum threshold of the means-tested subsidy will rise from €47,500 to €60,000, which means more people will now be eligible. Those earning above this new threshold will still be entitled to the universal element for younger children.
The base income threshold will also rise from €22,700 to €26,000. This means more people will be entitled to the maximum subsidy which will be paid below this amount. There will also be a rise in the multiple child deduction from €3,800 to €4,300. This is the amount a parent’s income is reduced for the purposes of calculating the subsidy for each additional child.
Leisure Time Might Become More Expensive
The rate of VAT applied to things like eating out, staying in a hotel and going to the cinema will rise. This tax has been at a reduced rate of 9% for several years for the hospitality and tourism sectors – a measure introduced during the recession. It will now go back up to 13.5% from January 2019. This rise is likely to be passed on to consumers in the form of higher prices, though some businesses may absorb the cost themselves. This could be a good time to look at promoting your employee discounts scheme to your people to ensure that they are getting the best deal on their leisure spending.
The Cost of Driving and Heating Homes Won’t Go Up
As a result of the budget, at least… That’s because there will be no increase in the carbon tax, which is applied to car fuel and the energy used to heat homes.
But don’t forget, tax isn’t the only reason bills can go up and energy companies have been putting up prices. Your people may find that switching can help them find a better deal and could even make those household bills smaller.
Speaking of Cars…
For employees planning to buy a new car, the cost could soon be higher. A new 1% surcharge on Vehicle Registration Tax (VRT) will be introduced for diesels from January 2019, so it could pay to buy before.
For employees eyeing a hybrid or plug-in hybrid it’s better news. The VRT relief currently available on these low-emission vehicles which had been due to end this year has been extended to the end of 2019.
Being a Landlord Will Become More Lucrative
That’s because mortgage interest relief for those renting out a property will rise from 80% to 100% from January 2019. It’s an increase that comes two years earlier than expected.
Pension and Welfare Payments Are on the Up Too
There will be an increase of €5 per week for weekly social welfare payments from March, and that includes the State Pension. There will also be increases for some other payments that are dependent on income and circumstance, largely for the elderly and families with children. That includes:
- The Back to School Clothing and Footwear Allowance (BSCFA) increasing by €25.
- The Qualified Child Payment rising by €2.20 per week for under 12s and by €3 for those 12 and over.
- The amount of income disregarded for calculating One Parent Family Payment for a parent that works will rise by €20.
- A similar amount to disregard when calculating Working Family Payment will be introduced, but for maintenance rather than income.
And for those receiving such payments which entitle them to the Christmas bonus, including pensioners, this will rise from 85% of the normal weekly payment to 100% for winter 2019.
What Financial Education Do I Need to Provide for My People?
As well as helping your people understand the detail of the Ireland budget 2019 that is relevant to them, you should help them prepare for the following:
- Their paycheck may will look different from January with income tax and USC changes.
- They might have to budget more for going out after the new year due to the VAT rise.
- They should regularly review their budget when things change.