Possible Income Tax hike in Budget 2012?

In another election pledge U turn, Finance Minister Michael Noonan today refused to rule out a rise in Income tax in December's budget. It is to give effect to the pension fund levy and VAT cuts announced in the jobs initiative.

But in the Dail, Minister Noonan appeared to suggest he cannot guarantee no tax hikes in the budget.

Mr Noonan said: "I am not going to rule out any tax initiative, or any tax increase or any tax reduction."

FS

Income Tax changes in Budget 2011

A somewhat belated look at what effect Budget 2011 will have on your take home wages.

Income Taxes

• Tax Bands and Credits were reduced from 01^st January 2011 by 10%. The effect can be seen Below:

Income tax bands

·         The standard rate tax bands display the level of income one can have before having to pay higher rate income tax (currently 41%).

Standard Rate Bands from 1 January 2011
	2010 (€)	2011 (€)
Single / Widowed	36,400	32,800
Married One Income	45,400	41,800
Married Two Incomes*	72,800	65,600
One Parent / Widowed Parent	40,400	36,800

*The maximum that can be transferred between spouses is €45,400 in 2010 and €41,800 in 2011.

Income tax: age exemption limits*

·         If an individual or married couple (Age 65+) earn less than outlined below, they are not liable for Income tax on their earnings.

Age (65+) Exemption Limits from 1 January 2011
	2010 (€)	2011 (€)
Single	20,000	18,000
Married	40,000	36,000

*Age credits and exemptions are being abolished over 4 years.

USC

·         The Universal Social Charge is a new levy which applies to gross income and replaces the Health and Income levy. This took effect on 01^st January 2011. The rates are as follows:

Individuals Under the age of 70

0%	below €4,004*
2%	€0 to €10,036
4%	€10,037 to €16,016
7%	above €16,016

*Where an individuals total income does not exceed €4,004.

Individuals aged 70 and over

2%	Up to €10,036
4%	Over €10,036

·         People aged 70 or over will pay the Universal Social Charge at a maximum rate of 4%, irrespective of income. Social welfare payments (payments from the Department of Social Protection) and similar payments are exempt from the USC. Medical card holders will pay the USC at a maximum rate of 4%.

PRSI

·         The PRSI ceiling of €75,036 has been abolished. This means that PRSI is payable on all income, previously you paid only on income up to €75k.

·         The Class S (Self-Employed) PRSI rate has increased from 3% to 4%.

·         As mentioned above, the PRSI relief on employer contributions to occupational pensions has been reduced by 50%.