On Tuesday two weeks ago, Minister for Finance Michael Noonan delivered his 2016 budget speech to gasps of relief from all around the country. After almost four years of crippling austerity, Mr Noonan finally proceed to give something back to the people of Ireland – particular the low income earners & students.
The Universal Social Charge (USC) cuts will benefit all workers, with the first three USC bands being cut by at least 1% and the threshold income to which USC applies being increased to €13,000. For example, a 22 year old earning €20,000 annually would see their annual take home pay increase by €341. Furthermore the new €13,000 at which USC applies should mean that more students working part time should remain out if the clutches of USC.
One area of potential disappointment in the budget will be the lack relief for employers who bear the cost of employing staff. While the wage level at which the higher level of employers PRSI contributions kick-in was increased from €356.01 to €376.01, the PRSI rates themselves have not changed. However, the introduction of a €550 Earned Income Credit for sole traders and small business owners may encouraging them to hire more current students and recent graduates.
The Capital Acquisition’s class A Threshold has also increased from €225,000 to €280,000. This means that children can receive an extra €55,000 worth of assets from their parents free from Capital Acquisitions Tax, a saving of €18,150.
The only change that may have a significant negative affect for students is the increase in the excise duty on tobacco by a further 50c per 20 pack of cigarettes. Excise duty is an indirect tax as people only choose to fall within in its scope by purchasing the product that duty applies to. This makes it a relatively painless tax for the government to increase, but one that disproportionately effects lower income smokers.
In summary, budget 2016 did plenty to help students in terms of putting more money back in part-time workers pockets, along with making small changes to hopefully encourage employers to hire more staff. These measures along with reduced level of Capital Acquisitions Tax payable on inheritances from parents make this one of the most popular budgets of recent years.
By Conor Leaden, Business Contributor