- Budget 2024 Commentary: Marian Ryan, Consumer Tax Expert & Director at Taxback, personal and corporate tax specialists
“Budget 2024 is a far cry from last year’s cornucopia with the Government instead prioritising financial prudence. It is a damp squib Budget which we believe many will be disappointed by.
Income tax cuts
“The Government’s decision to increase the entry point for the top rate of income tax to €42,000 is welcome – but it doesn’t go far enough. We believe the Government should have increased the level at which people hit the higher rate of income tax to €50,000 – this would ensure that those on the average Irish wage[1] would not be hit for the higher tax rate, not just in 2024 but for a number of years to come. Fine Gael promised to do this five years ago but has so far failed to deliver.
The modest increase in the entry point for the top rate of income tax – as well as the increases in tax credits and the changes around the Universal Social Charge (USC) - will allow many workers to bring home more of their pay after tax - however, most of this will likely be absorbed by the higher living costs that have become so prevalent today. The tax cuts, together with the energy credits, will help people better manage the ongoing cost of living crisis, though only to a certain extent.
The third rate of income tax, which had been examined by the Government and mooted ahead of last year’s Budget, appears to be dead in the water. If designed correctly however, a third rate of income tax could make a huge difference to the take-home pay of the middle class – and arguably more so than the damp squib changes introduced under Budget 2024..”
Social Welfare Payments:
“The increases in social welfare will help alleviate the financial hardship being faced by vulnerable individuals and families – though again, they don’t go far enough. Social welfare payments need to keep pace with the rising cost of living and until that happens, those dependent on social welfare will not be able to meet their basic needs around housing, food, healthcare, and utilities”.
Renters Tax Credit:
“The increase in the rent tax credit will help alleviate the financial burden faced by renters but the credit needs to be much higher. The average nationwide rent is currently €1,792[2] and in some parts of the country, rents are significantly higher than that. So if you take the average national rent, the new €750 annual rent credit doesn’t even cover the cost of half a month’s rent. A lingering concern revolves around the extent to which renters will actively claim the rent credit, or if they might be precluded from doing so because their landlord hasn’t registered their tenancy or indeed because they are outside the tax net. Many of those renting in retirement aren’t eligible for the rent credit because their income isn’t liable for tax.
We welcome the Government’s announcement that a public information campaign on the tax reliefs people are entitled to will be launched shortly. Tax reliefs are historically underclaimed and anything that can be done to encourage people to claim their dues here is welcome, particularly at a time when so many are struggling with higher living costs because tax refunds could make a big difference to their pocket.”
Energy Credits:
“Households will be disappointed to learn that they are only entitled to €450 worth of energy credits, compared to the €600 worth of energy credits granted under Budget 2023. Energy bills have skyrocketed – yet recent figures show that wholesale electricity prices fell by 64.0pc in the 12 months to July 2023[3]. With some pressure from the Government, energy providers are in the process of finally passing on some savings to their customers. However, electricity prices in Ireland are still the highest in Europe and almost double the European average[4]. The price of home heating oil has once again increased in recent weeks. This will see another cold winter for many households who are unable to heat their homes due to the increased costs”.
- Barry Whelan, CEO of Excel Recruitment - Commenting on Budget 2024
On income tax cuts
“Most workers will take home more pay after tax as a result of the tax cuts and changes announced in Budget 2024, which is hugely welcome. This will reward workers and may help address the acute staff shortages and staff retention issues being experienced in some sectors, such as primary and secondary schools, hospitality, and healthcare. Having less tax coming out of your pay pocket will always be an incentive to work, particularly when living costs are high, as they are today.
The Government’s decision to increase the entry point for the top rate of income tax to €42,000 is welcome – but it is disappointing that it didn’t go further as the new entry point is still well below the average wage of €47,208[1 . This means people on the average wage are still getting hit by the higher rate of income tax. Five years ago, Fine Gael promised to increase the level at which people hit the higher rate of income tax to €50,000[2 - we are still far off that mark.”
On minimum wage increase
The increase in the minimum wage will be a smack in the face for the many small businesses that are also facing high energy bills and additional sick pay entitlements. The entitlement to statutory sick pay will increase to five days in 2024 and this will be a huge cost for employers to bear. Prior to January 2023, there was no obligation on employers to pay sick pay.
The Government needs to be more cognizant of the impact on employers of minimum wage increases and the new sick pay rules – otherwise, we will see a huge amount of businesses shut up shop in the coming months and a huge amount of people losing their jobs as a result. There seems to be a belief that employers can absorb whatever costs the Government sends its way – however, the uptick[3in insolvency figures shows clearly that this is not the case. While the supports for small businesses announced in the Budget are welcome, we don’t believe they go far enough.”
On measures to address the housing crisis
“The Government’s decisions to increase the rent credit and to extend and amend the Help to Buy scheme are welcome though it remains to be seen if these measures go far enough. High accommodation costs aren’t just an issue for tenants and house hunters; employers too are impacted by the housing crisis because they are finding it difficult to retain and recruit staff who have decided to leave the country in search of more affordable accommodation.”
- Ian Lawlor, Managing Director, Lotus Investment Group - Commenting on Budget 2024 housing measures
“The introduction of tax reliefs to landlords who commit to staying in the market should help alleviate the shortage of available rental accommodation. Ultimately though, even if this measure encourages some landlords to stay in the market, there are simply not enough homes being built in Ireland to meet the demand out there and unless there’s a major overhaul of Ireland’s planning system, this vacuum will continue.
The Government’s decision to extend and amend the Help-to-Buy scheme will be a huge help to the many people struggling to get onto the property ladder. Help to Buy gives first-time buyers a substantial chunk towards the price of their home, thereby allowing them to get onto the property ladder without overburdening themselves in mortgage debt. The changes to this scheme will put Help to Buy within the reach of more first-time buyers, which is hugely welcome.
Based on our own real-time conversations with house builders, there is still huge demand for the new developments coming to the market. In terms of market readiness, recent figures show that mortgage drawdowns by first-time buyers are at their highest levels since 2007. Government schemes such as Help to Buy are helping to plug the affordability gap.
However, the changes which Budget 2024 is bringing to the Help to Buy scheme will be fruitless until the thorny issue of planning permission is tackled. Legislators need to take a closer look at what is holding up permissions being granted and ask themselves if the rights of the thousands without homes, living with parents and so on, are less than the rights of the far fewer number of planning objectors.
Lengthy planning delays within our system are leading to a severe dearth of shovel-ready sites. As a result, builders, starved of sites, are bidding the site prices up, driving site prices up and this in turn is impacting viability, increasing risk, and negatively impacting delivery. Ultimately the cost of all this is carried by the first-time buyer – if they can even find a home to purchase. Most of our developer clients would claim they are at below 50pc of their annual housebuilding output due to this shortage of shovel-ready sites.
Unless we find a way to put more shovel-ready sites in the market, our lack of supply will continue to stunt housing growth and add to the housing crisis.”
- Joey Sheahan, Head of Credit at online brokers MyMortgages.ie, and author of The Mortgage Coach
Commenting on Budget 2024
“While the targeted mortgage interest relief announced in today’s Budget will offer some relief to many homeowners who have been struggling with higher mortgage bills since interest rates started to rise, the level of support provided is a far cry from previous mortgage tax breaks.
The cap on the mortgage interest relief available under Budget 2024 means this tax break is worth €1,250 a year to those mortgage borrowers who qualify for it. However, in previous years, it has often been worth much more. In 2008 for example, a single first-time buyer could claim mortgage interest relief of up to around €2,000 a year[1.
Furthermore, in 2008, eligible borrowers were able to claim mortgage interest relief for the first seven years of the mortgage. The Budget 2024 tax break is a temporary one-year mortgage interest tax relief scheme and given that mortgage interest rates are unlikely to fall anytime soon, the limited term of this Budget’s mortgage tax break is of some concern.
Having said that, the Government’s decision to offer mortgage interest relief to many borrowers is a step in the right direction and the annual €1,250 will hopefully ease pressure on homeowners who are already, or are at risk of, falling into mortgage arrears.
The Budget 2024 increase in the rent credit is also hugely welcome as it should hopefully make it somewhat easier for tenants with an eye on the property ladder to save up their house deposit. Though at €750 a year, this rent credit is still only a drop in the ocean when compared to the rents being paid today.
The tax relief for landlords will be a huge incentive for small or ‘accidental’ landlords to stay in the private residential market – as for many small landlords, the tax on rental income is a huge financial burden and could leave them substantially out of pocket, particularly if they are only securing enough rent to cover their mortgage repayments.”
