Budget 2024 Analysis - Personal Tax

With less than three weeks to Budget Day, all Senior Ministers have by now submitted their respective wish list to Finance Minister, Michael McGrath.

Given that the cost of living crisis has not abated and many families are still struggling, we anticipate that the approach adopted in last year’s Budget may well be replicated. This included social welfare increases and increase in rate bands and a number of tax credits.

When compared with many other countries, Ireland has an extremely low entry point to the marginal rate of income tax - a single person earning in excess of €40k falls into the higher income tax bracket of 40%. This can make Ireland very uncompetitive when compared to other countries which can make it difficult to attract and retain talented workers.

Ireland also has a relatively narrow personal tax base, with the top 25% of earners paying approximately 80% of total income taxes. At the other end of the spectrum, it is estimated that almost one-third of income earners do not pay either income tax or USC. The Government could consider the Commission on Taxation and Welfare’s recommendation to broaden the tax base, so that everyone of working age who can work would be liable to income taxes.

Current Personal Tax System

The Irish personal tax system is overly complicated, comprising income tax, PRSI and USC. Each of these taxes has different bands and different rules for calculation, making the system unduly onerous to administer and understand.

There is also an inherent inequity in the system in that an additional 3% “surcharge” applies to self-employed income over €100k. This can result in a self-employed person being taxed at a higher rather than a salaried person on comparable income.

Whilst many people are aware that the top rate of income tax is 40%, the effective marginal once PRSI and USC are included is 52% where in employment or 55% where self-employed.

Any new measure that reduces that burden without further complicating the system must be welcomed.

Tax Bands and Tax Credits

The standard income tax rate band was increased to €40,000 last year together with marginal increases to some of the main personal tax credits, in line with the Government’s previous commitment to index rate bands and tax credits due to inflation. 

We should expect that increases this year will be similar to last year but may not be fully in line with inflation.

RBK will be holding its annual Breakfast Budget Briefing as a hybrid event in person at the Shamrock Lodge Hotel in Athlone and streaming live online on Wednesday 11th October. Mike Scanlan, Senior Tax Manager, RBK will be analysing the tax measures announced in Budget 2024 and Oliver Mangan, Chief Economist with AIB will look at the economic outlook. In the lead up to the Budget over the next number of weeks, RBK’s Business and Tax advisors will look at potential tax measures that the Government could consider and areas of concerns that are facing our clients.

Contact Us:

Should you wish to discuss any aspect of Personal tax, please contact our team:

  • Michael Smith: +353 90 6480600
  • Jackie Masterson: + 353 90 6480600