Take-home pay: Workers were given a welcome boost to their take-home pay yesterday, as Minister for Finance Brian Cowen announced increases to personal tax credits, the PAYE employee credit and the standard rate tax band as part of a personal tax package worth almost €900 million.
The new €1,000 a year Early Childcare Supplement for parents of children under the age of six, plus higher rates of child benefit, will also add to family incomes from April.
The tax credit increases mean all workers on the minimum wage will once again be removed from the tax net.
Widening the standard rate tax band means that about 90,000 workers will be taken out of the higher 42 per cent tax bracket.
Economist Austin Hughes of IIB Bank said the Minister's package would boost spending power in the coming year.
However, he added that anyone with a new mortgage and no children would see even modest increases in interest rates next year wipe out any gains they made in the Budget.
Interest rates increased by a quarter of a percentage point last week, adding about €50 to the monthly cost of a €350,000 mortgage.
Friends First chief economist Jim Power said the increases in tax credits and the standard rate tax band were at the upper end of expectations. "Everybody will feel slightly better off after this budget, but few will feel dramatically better off," Mr Power said.
Figures from PricewaterhouseCoopers show that, among single workers, those earning around €40,000 a year will receive the biggest increases in their take-home pay - about €70 a month.
Increases in take-home pay tail off for higher earners as a result of an increase in the annual ceiling below which workers must pay PRSI on their earnings.
However, as a percentage of their net income, single workers earning around €22,000 will notice the biggest difference in their take-home pay, their net incomes rising about 3.7 per cent.
Among married couples where both spouses are working, the maximum monthly increases will be enjoyed by couples with combined incomes of around €70,000-€80,000, who will be able to add €140-€141 to their monthly household budgets, assuming their incomes are split equally.
The highest monthly increases in take-home pay for single income married couples will be €68 for those with family income of about €60,000.
In cases where the employee is paying PRSI at a reduced rate, the monthly increases will be up to €73.
When the child benefit increases come into effect in April, parents will see a further boost to their disposable income.
A dual-income married couple with two children earning a combined €80,000 a year, where one spouse claims the home carer's tax credit, will be €157 a month better off than last year, an increase of 2.9 per cent.
A single income married couple earning €60,000 will be €84 better off, an increase of 2.05 per cent.
There was no change to the value of the home carer's tax credit.
For parents with children under the age of six, the Early Childcare Supplement will add €83 a child to their monthly household budgets from April.
