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Money Times - October 22, 2014

Posted by Jill Kerby on October 22 2014 @ 09:00

 

ONCE WATER AND LPT IS PAID, 2015 IS A NEUTRAL BUDGET AT BEST

 

Is Budget 2015 really the end of austerity? 

The coalition government certainly thinks so.  It has met the all-important 3% budget deficit figure (in fact, it has brought it below 3%, and nearly a year early) The official meaning  - ‘severity, plainness, or shortage’ and in the economic sense, a period of enforced thrift – pretty much defines the last six years for most people.  

But this budget is leaning more towards a loosening of severity and shortage and while some analysts are unhappy at the ending of spending cuts and more taxes to end the borrowing altogether as quickly as possible, the Minister certainly did not return to the wild windfall and high spending that pre-dated the 2008 crash.

Of course this is the first of two pre-election budgets and even though the tax and higher benefit giveaway of €1 billion is relatively modest compared to the €30 billion that has been taken out of the economy since 2008, it gave a little something to everyone …at least on paper.

However, once the 2015 property tax and the new water charges kick in from January, there will not be much cash to spend for most homeowners.  Tenants, if these costs are not passed onto them, will see a few more euro in their pockets.

Below are case studies (earnings only) that I keyed into the PwC Budget 2015 tax calculator which illustrate the impact of the change to the top rate of tax (40% instead of 41%); the raising of the marginal tax band from €32,800 to €33,800 and the lower universal social charge rates of 1.5% up to €12,012; 3.5% between €12,012 to €17,576; 7% from €17,576 to €70,000 and 8% over €70,000. (The self-employed will pay 11% on income over €100,000).

Where applicable, I’ve added the extra €5 per month child benefit, the 20% tax credit (max €100) on the annual water charge and for pensioners, the €100 rebate on their water charge. I then deducted the water charge balance payment and added an LPT valuation, but not the reduction that 14 out of 31 local authorities have voted in for 2015.  These examples may give you an idea of your potential savings.

In your own case, be sure to check to see if your local authority (or http://www.revenue.ie/en/tax/lpt/liability.html ) has reduced the LPT for next year before you work out similar calculations. 

SINGLE PERSON

A single person earning just €17,576, the minimum wage, will gain €174 from the tax and USC changes. They will receive a €35 water tax credit if they live alone. When the balance of their water tax of €141 is paid, the total gain falls to €32.

 

SINGLE PARENT, one child

A single parent of one young child, earning €40,000 a year will gain €446 from the tax/USC changes. The €35 water tax credit and €60 increase in annual child benefit brings their gain to €541, but when the €141 water charge balance is paid, it reduces to €400. If the parent owns a property worth €150k-€200k the LPT of €315 leaves them with a net gain of just €85 for the year.

 

MARRIED COUPLE, one income, two young children

A couple with an income of €59,000 will receive tax and USC savings of €546 in 2015. The additional child benefit of €120 and the €56 water charge tax credit brings their gain to €722. However, when the balance of the water bill (€222) is subtracted, their gain is reduced to €500. An LPT bill of €584 on a property worth €325k would wipe out this gain.

 

MARRIED COUPLE, two private sector incomes, three children, one over age 18

This couple earns €110,000, and between the tax and USC changes (including the 7% rate on their income over €70,000) they will gain €1,192. The extra child benefit of €120 and the €114 water charge tax credit (20% of €380) will raise this amount to €1,426.  But the balance of the water charge €260 and the LPT for 2015 on their €450,000 value house (€765) reduces their gain to €167.

 

WIDOWED PENSIONER, age 68, home worth €250,000.

With a total income of just €23,5000, this pensioner will gain €259 from the tax and USC changes. The €100 water charge allowance and the €57 Christmas bonus brings their gain to €316 but when the balance of the water charge of €76 and their local property tax of €405 (on a property worth €249,000) will wipe out their gain.

 

PENSIONER COUPLE

This pensioner couple, age 75 and 72 has a combined state and private pension income of €52,000. He is blind. The tax and USC changes results in a gain of €492.  Their combined €200 water charge exemption plus the €114 Christmas bonus brings their gain up to €806, but the balance on their water bill (€78) and local property tax bill of €945 on their €510,000 house will wipe it out.

 

 

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