The Government has announced a new universal service contribution, which will now apply on incomes from €4,000 upwards.

The Budget has also cut reliefs, which employers received for payments to pension funds for their staff.

While the main tax rates are untouched the Budget has made significant changes, which will eat into workers' pay.

The point at which people begin to pay the lower and higher rates of tax has been lowered by 10%.

There is also an increase in the PRSI rate for the self-employed and high-earning public servants.

The Government is curbing the reliefs for people who put cash into pensions.

It has also cut the tax break for employers who put money into retirement funds for their staff by 50%.

Meanwhile, stamp duty on buying a home will be slashed to 1% and first-time buyers who were exempt in the past will now have to pay.

As a result of the changes in the Budget, 139,500 people who were exempt from income tax in 2010 have now been brought into the tax net.

An additional 91,000 people who were previously paying tax at the standard rate of 20% have been moved into the top tax bracket and are now liable to income tax at the 41% rate.

Speaking this afternoon, Minister for Finance Brian Lenihan said Ireland could not have a tax system that damages its potential to grow, which, he said, is why the Government decided in the National Recovery Plan that two thirds of the required budgetary adjustment between 2011 and 2014 should be through expenditure reductions and one third should be raised by taxation.

Mr Lenihan said the income tax system was no longer fit for purpose. He said at one level too few income earners pay any income tax.