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Explained How can I get the most out of Budget 2023?
Financial advisor Ralph Benson looks at the budget announcements today and finds out who got top billing.

LAST UPDATE | Sep 28th 2022, 9:50 AM

THEY SEEK HIM here, they seek him there: it’s hard to find someone who’s not affected by the finance minister’s changes in Budget 2023. The long list of tweaks means that there is something for almost everyone.

It is hard to discern any overall strategy to get Ireland into shape for the new times we face. But that’s not what this budget is about. Like the Covid budgets of the last few years, the government is reacting to events rather than setting the trend.

So, the emphasis is firmly on redistribution and tax-and-spend to respond to the rising cost of living. In particular, the government has focused on the touchstone issues of energy, rental and childcare costs, which will affect almost everyone – if not directly, through a family member.

For example, a €600 energy credit for every household looks like a genuine attempt to take the sting out of rising costs for those who are feeling it most.

What’s missing from Budget 23 is any real attempt to simplify and reform. The hard stuff that increases day-to-day costs for all of us is for another day: high taxes, expensive insurance, public sector efficiency, and the costs that drive housing and infrastructure, for example.

Anyone for €500?

Perhaps the most consistent feature of Budget 23 is the €500 fix-all. Paschal Donohoe and Michael McGrath are throwing around €500 concessions like they are going out of fashion.

Among others, there are €500 uplifts for: the working family, carers, disability payment recipients, renters, people paying education fees, PhD researchers, and employees through voucher schemes. Some cooler kids receive a bit more: €1,000 to farmers for fodder support, for example. You’d almost be offended if you weren’t on one of these lists.

In fact, €4.1 billion, or 37% of the entire budget, is designated as ‘one-off measures’. It’s like spending €4 out of every €10 on fast fashion: it might do the job for a short period, but will be cast away in a year’s time. Clearly, the hope is that by that stage, inflation and the energy crisis will have abated.

What can you do to get the most out of Budget 2023?

Because there are so many one-off measures, some simple advice applies to almost anyone: make sure you claim what’s due to you. Here are three ideas to get the most out of today’s announcements.

  • First, claim all the tax concessions you can. If you’re looking to claim the benefits that kick in straightaway, like the rental tax credit, it’s easily done online direct with Revenue, and could be the most profitable 30 minutes you spend in a long time.
  • Second, if you’re an employee, have a word with your boss about the ‘small benefit exemption’. It’s just been doubled to €1,000 per person, per year. Normally an extra €1k of pay will cost your boss €1,111, and you’ll receive something between €480 and €800. But starting from 2022 under this scheme, you can receive a €1,000 voucher from your employer – and the cost to them is just €1,000. It’s likely many employers will use this as a way to help staff without committing to salary rises.
  • Third, go with the trend. It pays. As ever, tobacco and fossil fuels are out of favour, while there is support from the taxman for the likes of public transport fares, sports and community bodies and culture. For once, alcohol taxes remain unchanged. But in general, the government wants to ‘nudge’ you into better habits.

So when you add it all up, who will see a real difference? Here are five winners and losers from Budget 2023:

Right on trend: Anyone paying rent

For the first time in more than a decade, the tax system gives a break to Generation Rent. It’s estimated that around 400,000 people will benefit from this €500 annual tax break, which kicks in straight away.

Is it enough? It’s hard to avoid the feeling that it is an overdue acknowledgement of the cost of renting in Ireland. And with the average rent in Dublin at almost €24,000, this represents a rent saving of around 2%.

It’s also unclear how effective this tax break will be. Will it truly save renters money? Or will it simply push up payment capacity, driving rental prices further?

Looking good: Parents of young children

Childcare is another long-term cost pressure, afflicting working parents in particular. The government’s aim is to reduce the cost to parents by 25%, at a total cost of €121 million.

Again, this will doubtless be welcome to those on the receiving end of it. But will it increase supply? And does it lack ambition?

The numbers suggest that childcare could be made free at the point of use in Ireland for under half a billion euros. Surely that would be a bargain in terms of the scope for extra economic activity, income tax receipts, not to mention women’s participation in the workforce.

Still current: The welfare recipient

It’s no surprise that the government has expanded several measures to support those in receipt of welfare benefits.

There are increases in core welfare benefits of €12 per week. What’s interesting is that much of the other increases are – for now – one-offs.

There’s a double-payment of child benefit in November, for example, providing an extra sum ahead of Christmas. But the benefit itself has stayed the same, at €140 per child.

In last season’s colours: anyone earning more than €40,000

No one should get excited about tax changes in this budget. The headline announcement on tax is that the 40% rate will now kick in at €40,000, up from the current €36,800.

That’s an after-tax increase of 7%, and welcome for those in that bracket. But when the government believes inflation will be 8.5% this year, like everyone else, top-rate taxpayers are poorer.

In fact, there is almost no attempt to reduce the tax burden on people in Ireland – least of all top-rate taxpayers, as a look at The Journal’s tax calculator shows. 

No doubt many will find this disappointing, especially when you consider that because of inflation, they are paying increasing amounts of VAT and other taxes for goods and services.

The expansion of free GP care to everyone on or below the median income is a reminder that it doesn’t take much to be a top-rate taxpayer in Ireland. With the median income around €47,000, free GP care will at least benefit this section of society.

Wearing flares: business

If the personal measures in Budget 2023 seem like lots of stocking fillers, with no big present, the approach towards business is the reverse.

Here, the focus is on an energy support scheme to pay up to €10,000 a month to businesses where their energy costs have gone up by more than 50%.

That will be meaningful for family businesses and SMEs, particularly manufacturers, which have seen huge rises in input costs over the last 12-18 months. 

Big businesses and those in the services sector meanwhile need to hunker down and wrap up warm in last season’s colours.

Ralph Benson is a chartered accountant and head of financial advice at online investments and pensions advisor at Moneycube.ie.

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