MINISTER FOR FINANCE Paschal Donohoe has announced a reduction in rates of the Universal Social Charge (USC) and a rise in the point at which you get charged the higher rate of income tax.
He said that a “system where those earning an average wage are charged the higher rate of tax is unfair”.
“We cannot hope to remain competitive if someone on a relatively low income and who decides to work a few hours overtime has nearly half that extra money taken in tax,” the Minister said.
The entry point for single earners to get charged the higher rate of tax will increase from €33,800 to €34,550, a rise of €750.
This means that anyone earning under €34,550 will only be charged the normal rate of tax, while those earning over it will see a slight reduction in the tax that they pay
The 2.5% rate of USC will reduce to 2%, and the ceiling for this new rate will increase from €18,772 to €19,372.
The 5% rate of USC, meanwhile, will reduce from 5% to 4.75%.
The top marginal rate of tax on income up to €70,044 will now be 48.75%.
The Minister also announced a €200 increase in the Earned Income Credit, bringing it to €1,150. He said the increase will benefit over 147,000 self-employed people generating economic activity in the country.
As well as that, Donohoe said that he would be establishing a working group to plan, over the coming year, the process of amalgamating USC and PRSI over the medium term.
He added: “A key objective of this group and, of mine as Minister for Finance, is that this process does not narrow the tax base but ensures that our personal taxation system is both competitive and resilient in the future.”
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