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Dublin: 13 °C Tuesday 4 August, 2020

Here's what Budget 2019 means for someone earning €40,000

This is what your savings will be.

Image: Shutterstock

THIS YEAR’S BUDGET contained a number of tax changes that will mean an increase in the take home pay of workers at different levels.

Finance Minister Paschal Donohoe announced a reduction in one of the USC rates, an increase in the ceiling on the standard rate of income tax and the increase in a number of tax credits.

So, using our Budget Calculator, let’s take a look at what this means for someone earning €30,000.

Private and public sector workers

If you’re single and earning €40,000 you are going to benefit from reductions in your tax obligations on both Income Tax and the Universal Social Charge.

The entry point for the higher rate of Income Tax is being increased from €34,550 to €35,300, so people earning €40,000 are going to pay less tax at the higher rate.

So here’s how your Income Tax payments will play out compared to 2018:

  • Tax paid on the standard rate = €7,060 (+€150)
  • Tax paid on the higher rate = €1,880 (-€300)

This means that workers earning €40,000 will pay Income Tax of €8,940, a saving of €150 on last year.

On Income Tax your annual saving is €150

But PAYE workers also pay taxes in the form of the Universal Social Charge (USC).

The ceiling on the second rate of USC is being increased by €502 to €19,874 and the third rate of the USC is to be reduced from 4.75% to 4.5%.

So here’s how your USC tax payments will play out compared to 2018:

  • 0.5% on the first €12,012 = €60 (-)
  • 2% on up to €19,874 = €157 (+€10)
  • 4.5% on up to €40,000 = €906 (-€74)

This is a total annual USC payment of €1,123, a reduction of €64 on 2018.

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On USC your annual saving is: €64

Overall tax saving: €214

Self-employed workers

If you are self-employed and currently earning €40,000, you will benefit from the same savings as above.

However, Donohoe also announced an increase in the Earned Income Credit from €1,150 to €1,350.

This will result in an additional saving for self-employed workers of €200 per year.

Overall saving: €414

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About the author:

Rónán Duffy

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