The rate of the Universal Social Charge (USC) has been reduced for the first time in five years, from 4.5% to 4%, in Budget 2024.
The entry threshold to the 4% rate of USC will also be raised to €25,760.
Minister Michael McGrath has also increased the point at which workers pay the top rate of tax to €42,000, while Personal, Employee PAYE and earned income tax credits are being increased by €100 each.
In his Budget speech, Minister McGrath told the Dáil that from 1 January 2024, the national minimum wage will increase by €1.40 per hour to €12.70 per hour, and to ensure that such workers remain outside the higher rates of USC, he will be raising the entry threshold to the 4% rate to €25,760 in line with the increase to the national minimum wage.
"A full-time worker on the minimum wage will see an increase in their net take-home pay of approximately €2,300 on an annual basis," the minister said.
ISME, the Irish Small & Medium Enterprises Association, said the increase in the national minimum wage will cost businesses €3,228 per employee at or near the minimum wage.
Daryl Hanberry, Tax Partner and Head of Tax & Legal, Deloitte Ireland, said the measures will benefit many taxpayers, particularly the squeezed middle. "A competitive and effective tax policy is a vital part of Ireland’s position in retaining and attracting talent in a world which is highly digitalised and mobile. This is critical both in the context of inward investment to Ireland and supporting indigenous business and entrepreneurs."
The total value of the USC changes announced today amounts to €350 million next year and €400 million in a full year.
The announcements are part of the personal income tax package to the value of €1.3 billion.
The minister said this year's Budget has a particular focus on tackling child poverty. The minister said he is increasing both the home carer tax credit and the single-person child carer credit by €100 and increasing the incapacitated child tax credit by €200.
"I am extending the USC concession which applies to those who have a medical card and earn less than €60,000 per year for a further two years until the end of 2025," he said.
PSRI rates increase
Minister for Public Expenditure Paschal Donohoe told the Dáil today that it was now "appropriate" to increase PRSI contribution rates, and so from 1 October next year all PRSI contribution rates will increase by 0.1%.
"This measure, which will raise €240m in a full year, is a modest but necessary step to secure pension entitlements for this and for future generations," Minister Donohoe said.
Mr Donohoe also said that weekly Social Protection payments will increase by €12 a week in order to ensure the country's welfare system improves living standards and helps people to fulfil their potential.
The Carer's Allowance Means Test disregard will also increase to €450 for a single person and €900 for a couple, while the minister said he will allocate more funds to provide free travel for people medically certified unfit to drive.
