A mortgage tax break worth up to €1,250 for homeowners and three energy credits of €150 each are among measures being considered by the Coalition leaders as they meet with the two budget Ministers Michael McGrath and Paschal Donohoe to finalise the details of Tuesday’s budget.
After a weekend of intense negotiations, it is understood a package of once-off measures has been agreed – likely to include energy credits worth €450, a double payment of child benefit before Christmas, and a double welfare payment after Christmas – and the health budget has also been settled. At least one of the energy credits is expected before Christmas and two afterwards.
Government sources say there is agreement to reduce childcare fees by another 25 per cent but that it would occur “later” in 2024, with final details still be agreed. Sources indicated that at this juncture it is unlikely the increased rate will kick in from January 2024.
Final talks ahead of budget day are closing in on a package of tax cuts and adjustments that will see more income protected from higher rates of tax.
Budget 2025 main points: Energy credits, bonus welfare payments, higher minimum wage and tax changes
Budget 2025 calculator: How this year’s budget will affect your income
VAT cuts for restaurants were a bad idea last month. Why are they a good idea now?
Got a mortgage? There is up to €2,500 in tax relief waiting for you
It is understood that the personal PAYE and earned income tax credits will increase by €100 to €1,875 under the proposals, while as expected, the level at which taxpayers begin paying the top rate of tax will increase by €2,000 to €42,000.
More income will be protected from higher rates of USC, with the ceiling for the two per cent rate increasing from €22,290 to €25,760, under the proposals. Meanwhile, the 4.5 per cent rate currently levied on income between €22,291 and €70,044 will decrease by 0.5 per cent to four per cent.
Landlords will get an escalating series of tax breaks the longer they stay in the market, rising from €600 next year to €1,000 in 2026 and 2027, under proposals being considered as part of the budget.
It is understood that a proposal - described by sources as “modest” - being examined by party leaders would see €3,000 of landlords’ income taxed at the standard 20 per cent rate in 2024, equating to a benefit of around €600. In 2025, that would increase to €4,000, worth about €800 extra to the landlord, and in 2026 and 2027, it would rise to €5,000, translating to a benefit of €1,000. The structure, sources said, was designed to encourage landlords to stay in the market.
The health budget was agreed after difficult negotiations between Mr Donohoe and Minister for Health Stephen Donnelly and officials focused on the rising cost of healthcare but also the budget overruns this year which have seen the Department of Health require a €1.1 billion bailout before the end of the year.
A spokesman for Minister for Health Stephen Donnelly said: “The budget allocation for Health has been finalised and the allocation will be focused on dealing with continued high inflation and increased patient demand.”
Mr Donnelly has argued during negotiations that Health services across Europe are experiencing a significant increase in demand for care since the disruption caused by the Covid pandemic, including in Ireland. Meanwhile, his position has been that many more patients are presenting to Emergency Departments, that there has been huge increases in healthcare inflation.
Talks are still continuing on the social welfare package, but sources said a €12 increase in welfare and pension payments was now “nailed on”.
It is understood that the tax package has also been largely agreed, and will include a form of mortgage interest relief up to €1,250 for homeowners who have seen their loan repayments rocket since the ECB began increasing rates last year.
Meanwhile, the Budget is understood to include €55 million in funding to expand provision of free school books to the first three year groups in secondary schools.
Free books were introduced for primary school pupils in last year’s budget. First, second and third year students are to get free books from the start of the 2024/2025 school year, under funding secured by Minister for Education Norma Foley.
The funding is also to cover classroom resources like copy books, dictionaries, calculators and novels.
In total some 770,000 children are expected to get free books between primary and secondary schools once the expansion takes place in September 2024.
The budget will also include the establishment of new savings funds into which the Government will promise to channel excess corporation tax revenues.
Minister for Housing Darragh O’Brien has said he is “confident” the tax credit for renters would increase in the budget on Tuesday.
While Mr O’Brien would not be drawn on the amount, he added that more work needed to be done on raising awareness of the credit.
Only half of renters entitled to claim the €500 a year tax credit did so last year, new figures from the Department of Finance show.
It is understood the minister has indicated he wants the annual credit increased to about €800.
Speaking on Monday, Mr O’Brien said: “I don’t have a figure and that’s to be decided upon…I obviously want to extend it into next year and I’d like to see it increased.
“It’s been a really good support for renters. It’s a real way of reducing the cost of rent…The base rate is €500 and I’d like to see that increase and I think we would be confident in saying that we will.”
The Fianna Fáil TD said
a lot of work had gone into Budget 2024 to ensure the package was fair, progressive and “helps those who need it most”.
“There’s no question that those on variable rate mortgages or indeed tracker mortgages, particularly those with the non-bank lenders who have seen ten rate increases in a very short space of time, that’s having a real impact on families and that’s an area that I know Minister [for Finance] McGrath has been focused on,” he added.
The rent credit was available for all of 2022 and the relief is to run from 2022 to 2025 inclusive. The Department of Finance has estimated the credit might be of benefit to approximately 400,000 taxpayers.
The figures show 203,000 taxpayer units claimed the credit for 2022, 35,444 taxpayer units have made claims for 2022 and 2023, and 16,083 taxpayer units have made claims for 2023 only. The total amount claimed for last year was €33.59 million and total amount claimed to date for 2023 is €31.86 million.
Last month the Minister for Higher Education, Simon Harris, said he would like to see the maximum for an individual under the scheme doubled to €1,000 a year in the upcoming budget.
The credit, introduced in Budget 2023, is worth a maximum of €500 a year per individual or €1,000 per jointly assessed couple. Those eligible include people paying for private rented accommodation or a parent who pays rent on behalf of a university-going child.
