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Budget 2016: What Do We Know?

#TaxTipsIreland #Budget2016

Budget 2016 is now less than a fortnight away and the Government has given us a few tasters of what’s coming up in the full announcement on October 13th

The budget package is expected to be around €1.5bn divided equally between spending and tax cuts, so how will they use it?

Here’s what we know so far:

1. USC will be cut

The Minister for Finance, Michael Noonan, has confirmed that the Universal Social Charge will be cut by at least 1%. The tax was brought in as an emergency measure in January 2011 to replace health and income levies.

This very much unloved tax has even been called on to be abolished but this is unlikely considering it earns the Government over €4bn a year.

The current USC rates are as follows:

Income Band

 USC Rate

 Up to €12,012


 From €12,012.01 to €17,576


 From €17,576.01 to €70,044


 Any PAYE income over €100,000



Anyone who earns up to €70,000 per annum pays a top rate of 7% USC.  If the top rate of USC is cut by 1%, a person earning €35,000 per annum will be better off by €175 per year.

USC for self-employed

The Minister is also expected to reduce the Universal Social Charge rates for the self-employed, bringing them more in line with rates paid by PAYE workers.

The self-employed currently pay 3% more USC on earnings over €100,000 than PAYE workers earning the same amount. This rate has been criticised by entrepreneurs saying that it suppresses innovation and discourages new startups.

We welcome a reduction in USC as a reflection of the country’s economic recovery and a welcome boost to your pay packet.


2. Increased funding

Cabinet ministers have requested a significant increase in the number of teachers and Gardaí. The Department of Education has asked for 900 teachers and the Department of Justice has requested 500 more Garda recruits at a cost of €10 million.

Despite a rise in these requests from ministers, Government sources have said there is no scope to increase this amount.

The HSE has already asked for an increase of €2bn in funding but for now we’ll have to wait until October 13th to find out exactly what’s in store.

The average Irish tax refund is €1,880


3. Homelessness and housing

The Simon Community has launched their ‘’Homeless Forecast Campaign’’ urging people to join them in asking the Government to put the housing crisis at the top of the agenda for Budget 2016.

The charity has requested more early intervention services and greater access to affordable housing.

Speaking at the launch, Niamh Randall, National Spokesperson for the Simon Communities said: ‘‘It is unacceptable to expect people in emergency shelters or sleeping rough to wait two years to have a place to call home.”

The Irish Government has pledged to end long-term homelessness by 2016 but the charity fears this won’t happen if they continue to make cuts to essential services.

You can find out more about the Simon Community's Homeless Forecast Campaign here.


4. Childcare

The Tánaiste Joan Burton has said she would like to see an increase in the Child Benefit. The benefit was increased by €5 last year and she has indicated that she hopes to see it rise again in a similar manner.

However, she did warn that no decisions had yet been made and all the proposals would be subject to resources.

According to Minister Noonan, Children’s Minister James Reilly is preparing proposals for the Government to take action on childcare and improve women’s ability to participate in the workforce.

The Future Investment in Childcare in Ireland Report released earlier this year recommended increased investment in early childhood services and we hope the Government listens to these proposals as they will make a huge difference to parents, many of whom can’t afford to work due to rising childcare costs.

The average Irish tax refund is €1,880


5. Reduction in Capital Gains Tax

With the recovery of housing prices all over the country, there is an increased focus on the current Capital Gains Tax rates and thresholds.

While the rates have been increased from 20% to 33% over the past few years, it certainly isn’t expected to increase further and may even drop.

Minister Noonan may instead elect to increase the thresholds which apply when a gift or inheritance is received. The latest is that a dramatic “once off” rise in the tax free allowance would be favoured over incremental rises spread over a number of years.

The Government hopes this would encourage the transfer of assets sooner rather than later. This may even be a temporary increase as they seek to incentivise activity in this area.

We will have to wait until October 13th to see exactly what’s in store but in the meantime, keep an eye on our blog for more updates on Budget 2016.

About The Author

Ciara Kennedy - Digital Content Writer @ Taxback.com

Ciara is our Digital Content Writer at Taxback.com. Since graduating in Journalism and Visual media, Ciara has worked in online marketing in Ireland and Australia and loves writing in all its forms.

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