What does Budget 2021 mean for you? Financial planner Eoin McGee has some answers

Eoin McGee looks at yesterday’s budget and breaks down what it means for some members of the workforce.

OVERALL, THIS IS a budget that has attempted to pinpoint help where it was needed but also is mindful of the overall position of what the entire country needs.

With some focus on supporting frontline workers in health and the gardai and support services such as an increase in the allocation of SNA’s, the government has achieved this to a point. 

When you are spreading close to €88 billion on behalf of five million people I have no doubt it is a tough task making sure you don’t miss any particular sectors in specific need.

The repeated name-checking of the Arts during budget day was obvious but also there was an overall sentiment that if we can keep supporting business then that business will, in turn, support the workers. 

I think this is the most important thing that has been recognised by this budget. The introduction of the Wage Subsidy Scheme back at the very start of the first lockdown kept employees and employers connected to each other.

The introduction of the scheme in the budget where employers can get up to €5,000 per week in cash flow should result in more businesses remaining open and more employee/employer relationships staying intact. That’s important for when this is all over.

This is a medical crisis, there will be a solution to this one day. Until then the government needs to support those businesses being prevented, in the interest of public health, from opening their doors. This budget was a major step in doing that. 

The budget had lots of top-down thinking involved, support business to support you.

But it then left us all feeling a little left out as individuals. No big personal income tax changes, no handouts, no increase for those on core social welfare.

But don’t let that lead you to believe it won’t impact you as an individual, we just need to look a little deeper to see how the big changes affect us individually. Below, I give some feedback to queries built around specific cases, representing some of the people in the workforce who are most affected by yesterday’s budget:

Bar worker

A 32-year-old, single man, bar worker who was on PUP during the lockdown, back to work for a few weeks but now gone back onto PUP this month for a second time as the bar has closed.

The good news is that PUP is now confirmed to continue with a strong suggestion that it will keep going as long as it is needed. 

Your bar will have been hit really bad since March, announcements yesterday should have significantly increased the chances that the company you work for will actually still be in existence once this is all over, whenever that is.

The new CRSS scheme means your boss should be able to get up to €5,000 a week in cashflow from revenue. This is on top of the wage subsidy scheme should they decide it is right to move you to do that instead of the PUP. In addition to this, the rates waiver will run until the end of the year releasing further cashflow. 

For your customers, the price of the pint didn’t go up and your sector, in general, got a reduction in VAT to 9%.  

Self-employed artist

A self-employed, single woman, in her 40s. An artist working in the events industry earning some money but earnings have plummeted this year so she’s also receiving the lower PUP payment. She has a mortgage of €200K. She is filing tax returns now for last year but can’t afford the tax bill after this tough year.

The Arts are certainly in focus. They have allocated €100 million to this sector in the budget and more important yesterday was the recognition of its importance in our society.

How that €100 million will be used will become evident in the coming days and weeks but hopefully, it trickles down to people like you quickly, because you need it. But more importantly, because society needs you.   

There has been no extension to the mortgage breaks from the banks but that does not mean that if you are in financial difficulty you can’t get a break. It just means it won’t be as easy to get one and if you do it will now be recorded on your credit report. If you are struggling to meet your mortgage repayments don’t let that stuff worry you one bit, just get in touch with your mortgage provider and ask for help.

A change from yesterday is that tax credits for self-employed have gone up by €150 to equalise them with the PAYE worker. This effectively means that self employed people like you will now pay €150 per year less in tax.

The issue that existed before – where you worried about losing your PUP if you did some work – has now been removed somewhat. You can earn up to €120 and still get your PUP. Your tax returns this month for 2019 will be a big concern but you should be aware that you can now postpone both your 2019 final taxes and preliminary tax for 1 year without penalty. Be sure to discuss this with your accountant. 

Working couple, parents of three children

A couple, working full-time from home, with three children. Combined income is roughly €80K PAYE. They pay childcare and have a mortgage of €300K with monthly payments of €1800. They have two cars, not driving much at the moment. One is a smoker.

The good news is that your taxes, other than some minor USC adjustments, will not really change. Unfortunately, there is no additional support for childcare. However you will be glad to know that working from home is beneficial for two reasons, one is the cost of petrol and diesel has gone up by between €1.30 and €1.50 for a tank fill depending on whether you drive petrol or diesel. So you will save on that if you are working from home. 

But secondly and more importantly the budget has reminded us of allowances available for working from home. Your boss can pay you up to €3.20 per day tax-free or in the absence of that you can claim things like light, heat and as confirmed by the minister in the budget also for broadband. Importantly there is an inter-departmental group set up to review this entire situation so hopefully, we will see some changes here. 

Any savings you make on diesel as you are not driving to work or money you might get back in tax because you are working from home may, however, be offset by the fact that cigarettes have gone up by €0.50 a packet. If you smoke a pack a day, your cigarettes are going to cost you over €5,000 a year now.

You earn enough in the house that you are paying tax at the higher rate. In simple terms €10,000 of your €80,000 before tax income is now being spent on your cigarettes. Yourself and your partner work about 6 weeks of your year to cover the cost of your smokes.  

Or looking at it another way, if you both earn €40,000 each then if you gave up the cigarettes one of you could take three months a year off and spend it with the kids and it would be cost-neutral. And, that’s before we consider any potential savings on childcare for those three months.

Bank worker, single mother of two, working from home

A mother of two, in her 30s, working for a bank on €38K PAYE, currently working from home. Paying rent of €1200 and around €750 childcare. Gets €800 maintenance a month from ex-husband. Currently trying to save for the affordable homes mortgage.

The good news for you, (maybe less so for society but that is a different article) is that the increased help to buy has been extended. This can give you up to €30,000 refund of your taxes to help with the deposit for a house. You need to be a first-time buyer and buy a new house but it is serious support. 

Rebuilding Ireland Homeloans also got a further injection of cash. If you’re not familiar with it, it is a mortgage from the government to buy your first home. They will give you more money than the banks and it is fixed for the full term of the loan. The rates are ok too. 

The government have also committed to building 9,500 homes next year, but with 90,000 on the waiting list, I wouldn’t be giving notice to your landlord yet. 

A top tip for you is that if your maintenance is court-ordered then you have more chance the banks will take it into account when looking at your ability to borrow. 

A taxi driver, married father of two

A self-employed taxi driver, in 50s, married with one child. Paying monthly rent of €1350. Earnings were up about €60K before Covid, but have dropped significantly due to the pandemic. Now getting an average of 2/3 days’ work a week but also getting the PUP payment.

You will now be able to earn up to €120 per week and still get your PUP. Very importantly for you, the tax you were due to pay for 2019 and prelim for 2020 this month can now be postponed for a year interest-free. You do still need to get your accountants to help to do this but it will help.

Also, tax credits for self-employed have gone up by €150 to equalise you with the PAYE worker. In simple terms, this means you will now pay €150 per year less in tax.

You will be hit badly by the increase in the cost of fuel, unfortunately, and as you continue to bring people to and from essential workplaces it feels like you are being left behind a little. If things get bad, be sure to engage with your landlord and see if they can give you some respite on the rent. 

Eoin McGee CFP, Author of “how to be good with money”. Find him at Twitter, Instagram and Facebook.

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