Taoiseach Enda Kenny has said the top tax rate on middle-income families will be dropped to a maximum of 50 per cent in 12 months’ time, all but confirming plans cut the upper income tax rate to 39 per cent in the next budget.

The Taoiseach also promised a further round of tax cuts in the budget in two years’ time if the Government is returned to office after the next general election.

Mr Kenny remarks, in a Dáil speech this afternoon, are also seen as a clear indication that the new upper USC rate of 8 per cent on income exceeding €70,000 would be increased to 9 per cent when the top income tax rate is cut again.

Although Minister for Finance Micheal Noonan did not set out how the Government would introduce further income tax cuts this time next year, the Taoiseach said tax measures in the 2016 budget would follow the formula deployed yesterday.

This also implies that the two lower USC rates would each be cut by a further half percentage point to 1 per cent and 3 per cent respectively.

“We now have a formula for targeting tax rate reductions at low- and middle-income earners without giving disproportionate benefits to those on the highest incomes,” Mr Kenny said.

“The tax rate on middle income families will be lowered further in Budget 2016 - to at most 50 per cent - while ensuring those on higher incomes continue to pay their fair share.”

Mr Kenny said Budget 2015 has reduced the total 52 per cent tax rate on low- and middle-incomes by 1 percentage to 51 per cent. He said 635,000 middle-earners whose income is between €33,800 and €70,000 will benefit.

“For a working family of two middle income public servants, such as a guard and a nurse, each earning around €50,000 these changes will result in an extra €100 per month.”

He said the decrease in the two lower USC rates to 1.5 per cent and 3.5 per cent respectively was designed to make sure work pays at lower incomes.

“The increase in the threshold at which USC becomes payable to €12,000 will take a further 80,000 out of the charge altogether, on top of the 330,000 that were removed by this Government in 2012.

“That’s 410,000 people on low incomes whose earnings are now better off under this Government than the last.

“It is estimated that the extension to the income tax standard rate band will remove approximately 33,000 taxpayers from liability to the higher rate of income tax altogether.”