Paschal’s perks and pitfalls you may have missed in the Budget
SEVEN TAKEAWAYS FROM BUDGET 2019
Budget 2019 appears to be done and dusted. But as always, the devil is in the detail. You need to know what the key features of the Budget were and how much they will give you, or cost you. Then you can avail of the perks and avoid the pitfalls. Here are seven takeaways you should know about.
GET €1,500 A YEAR INTO YOUR HAND
It wasn’t noticed on the day, but a line in Paschal Donohoe’s speech revealed that hundreds of thousands of people are still not bothering to claim the biggest tax break in the Budget. It’s worth up to €1,500 into your hand, and over €4,000 if you claim four years of backdated credits.
The Finance Minister announced a €300 increase for the home carer’s credit, stating that 80,000 families received it.
It’s for people who work in the home, caring for children or other dependents.
Yet 306,000 people met this description in the 2016 census – and it seems most of them are not claiming this credit.
It’s not that hard to qualify for this valuable boost to family finances.
The home carer can still work part-time but must earn less than €9,600 – or €7,200 for a full credit. He or she must also be part of a jointly assessed couple. You can claim a home carer tax credit by using PAYE Services, available through Revenue’s MyAccount. You can also apply by completing a home carer tax credit claim form.
HOUSING AND CHILDCARE HELP
If you’re a middleincome earner faced with spiralling childcare costs, it must have been annoying to be excluded from Katherine Zappone’s affordable childcare scheme.
A new survey shows childcare costs spiralling past €9,000 a year.
The Budget has addressed that to some extent.
The maximum income threshold for the affordable childcare scheme will go up from €47,500 to €60,000.
You can also disregard more income if you have multiple children. However, for a two-income family that €60,000 limit isn’t very high – both partners would have to earn way less than the average wage to qualify.
Also, the way these payments are skewed, based on the last published scheme, means very little seems to be given to those near the upper limit.
Like many other childcare benefits, it seems to leave most of the squeezed-middle out in the cold.
The flaws of the affordable childcare scheme are highlighted by its sister, the affordable housing scheme.
Why are people who buy homes considered in need of help on incomes up to €75,000, while families with children are shut out if they earn over 60,000?
STUB OUT THOSE FAGS
Smokers get hammered in every budget. Another 50c was added to the price of a packet of fags, bringing the total to €2.70. A pack-aday habit now costs around €89 a week, or €4,628 a year.
Cancer-sticks also mean heavy penalties for life cover (with good reason), mortgage protection and income protection policies.
However, you can get major financial benefits as soon as you quit.
BUY A BUY-TO-LET
With the stock market dipping this week and a crash seen as imminent, investing in a buy-to-let looks like a safer bet than shares. The Budget also increased the amount of interest you can write off against tax.
Despite criticism in some quarters, this is not a special tax break – it’s removing an anomaly. Businesses can write off all of the interest they pay on a loan to buy a business asset.
That makes sense. But the amount of interest landlords could write off was reduced to 80%.
Next year, that figure will increase back to 100%.
That would make a big difference if you’re thinking of getting a buy-to-let property as our table shows.
If you paid, say, €5,000 in interest on a mortgage, you’d pocket an extra €485 from Paschal’s perk.
SELFEMPLOYED
Leo Varadkar promised to sort out the unfair tax and social welfare treatment of the self-employed when he was social welfare minister. And to be fair this has happened, albeit slowly, with the extension of some benefits and the (very gradual) equalisation of tax treatment, which continues in this Budget. The Earned Credit for selfassessed taxpayers has crept up in the
Budget by another €200 to €1,350. But it still has another €300 to go to match its PAYE equivalent.
But the biggie is jobseeker’s benefit, which is very important to the self-employed.
Jobseeker’s assistance is of little use because it is meanstested. And these tests use the previous year’s income. So people could be refused the dole on the basis that they were earning money a year earlier!
From next year, however, the self-employed will be able to claim jobseeker’s benefit, which isn’t means tested.
BUMP UP YOUR PENSION
All welfare recipients, including pensioners, got a fiver increase. It’s not that much because prices are rising – remember inflation? Next year your money will buy less. That fiver increase is really only worth €1.71 after inflation eats into it. For what it’s worth, the table above shows what pensioners will get.
So what’s the takeaway here? All those PRSI contributions don’t count for much. Your contributory pension will get you €11.30 a week more than someone who never worked a day in their lives. And neither offers much to live on.
Like most people, you probably need to invest in or bump up your pension. Automatic pension enrolment is on the way, which should add to the appeal of pensions by providing a topup from Government and employers.
HE TOOK MORE THAN HE GAVE
The minister’s claim to have cut tax by €365m (not real anyway) was undermined by €715m in tax increases. The biggest was the hike in VAT from 9% to 13.5%. That will add 4.5% to your bill the next time you grab a coffee or go out for a meal. Restaurants, bars and hotels have already hiked prices in advance of the Budget, with the latest figures showing a 2.2% annual increase – to which another 4.5% will be added.
Overall, Budget spending increased by €1.4bn but half of that will be gobbled up by inflation. Tax bands and credits should also rise by €500m to account for inflation, or we end up worse off. And so much of the spending increases and all of the supposed tax cuts announced this week are not even real. As think tank the ESRI has suggested, the Budget should be automatically indexlinked for inflation to avoid this annual charade.