You could end up with a decent wedge in your pocket.
Last month, Taoiseach Leo Varadkar committed to raising the level at which people in Ireland start to pay the top rate of tax (40%) on their income from €35,300 to €50,000 for a single person, or €100,000 for a two-income couple.
Varadkar’s proposal involves the higher rate threshold raising by €2,500 each year over the next five years.
The average full-time income in Ireland is roughly €46,000 per year and, according to the Taoiseach, just short of one million taxpayers – “around 920,000” in his own words – would benefit from the move.
Such a move will come at a cost, of course, and it is estimated that the plan will cost the government approximately €600m per year.
But what will it mean for your pocket?
Tax refund and filing specialists Taxback.com have crunched the numbers and, after filling in some details in the calculator below, you’ll be able to find out how your monthly and annual take home pay will be affected.
Underneath the calculator, meanwhile, you’ll find a number of examples compiled by Taxback.com outlining how individuals and couples with various incomes will be affected by plans to raise the top rate of tax.
Case 1
Peter – income of €40,000 per year
30 year old Peter works in marketing, where he earns €40,000 per annum.
He’s not married and does not have any children.
His current monthly take home pay is €2,618.58.
When the government’s plan is introduced, and the higher tax rate threshold is increased to €50,000, his monthly pay packet will increase to €2,714.75.
In other words, he’ll have just under €100 in his back pocket to spend each month.
Case 2
Phillip and Pamela – combined income of €70,000 per year
Philip (29) and Pamela (31) are married and have no kids.
Philip works in IT and earns €34,000 per year. Pamela works in the hospitality industry and earns €36,000 per year.
This year, their monthly take home pay has been €4.810.07.
The government’s tax plan would bring their take home pay to €4,833.67 – an increase of roughly €23 per month.
Case 3
Paul and Polly – combined income of €90,000 per year
Married couple Paul (45) and Polly (46) are jointly assessed for tax purposes. They both work in the banking sector and each earn €45,000 per annum. They have two kids under the age of 10.
At present, their combined take home pay is €5,944.24.
Under the new plan, their take home pay would be €6,305.34. So, in total, Paul and Polly would benefit by more than €360 per month.
Case 4
Pat and Penelope – combined income of €110,000 per year
Pat (48) runs his own business and earns 110,000 per year. His wife Penelope (44) works in their home and minds their three children, who are all under the age of 10.
Under the current tax system, their take home pay each month is €6,265.78.
When the new tax measures are introduced, their monthly take home pay increases to €6,576.55, which equates to an increase of €311.
The above calculations use the same tax credits, USC and PRSI rates and amount of child benefit as outlined in Budget 2019. The calculation is based on an increase in the income tax threshold from 35,300 (2019) to €50,000 (which is a difference of €14,700). It is also based on an assumption that any other threshold (single parent, married one earner and married two earners etc.) will benefit from the same increase. Lastly, the monthly take home comparison is made against 2018 rates.
For more information, including a no obligation estimate of your tax refund (taxback.com’s average PAYE tax refund is €995), check out taxback.com.
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