BY JOHN ELLIS, FINANCIAL ADVISOR
Budget Day is next Tuesday when Ministers Simon Harris and Jack Chambers will stand up with an €8.5 billion package and plenty of talk about “making work pay”.
The tax change that now seems almost certain is a rise in the point at which a single person starts paying the 40% rate. That threshold is €44,000. The talk now is that it will go to €46,000, “and a bit”.
If that is how it works out, someone already paying the higher rate would be around €400 a year better off, roughly €33 a month. If you earn below the threshold, the change does nothing for you.
Jack Chambers has been clear. The package, he said, is “modest”. Workers will get “a few hundred euro”. A few hundred euro is welcome. It is not going to transform the family budget.
But some households could face up to €1,000 in extra costs over the winter. The big energy suppliers are putting roughly €180 on the typical electricity bill and another €140 on gas. Health insurance is going up as well, with several of the main plans adding another couple of hundred euro from October.
Diesel is still above €2 a litre. And then there is home heating oil. As I wrote last week, a 1,000-litre fill is around €550 more expensive than it was last winter. Set that possible €400 tax gain against those increases and, for plenty of households, the numbers do not add up.
Energy has been one of the key issues in the Dáil. A record 323,559 electricity accounts were in arrears in the three months to July. Sinn Féin has called for a €400 electricity credit for every household. The Taoiseach has ruled that out. The Government appears to be looking at more targeted measures instead.
Harris said home heating oil was “a specific area of concern”. People who use it, he said, were generally older, lived in rural areas and tended to have lower incomes. For those households, oil is not an abstract statistic. It is a bill that must be paid every time the tank needs filling.
Carbon tax on a 1,000-litre fill is now around €180. A cut to that tax is expected, and a reduction in VAT on oil has also been discussed. Budget night will tell us which they choose. Fuel Allowance is €38 a week for 28 weeks, or €1,064 over the season. A €5 increase would add another €140 for those who qualify. That would help. But many working households will not qualify in the first place.
Child Benefit appears to be off the table. Childcare may move closer to €200 a month, but that is still being negotiated.
On Tuesday, I would be watching three things. First, does the 40% threshold move, and by how much? Second, does the Government cut carbon tax or VAT on home heating oil? And third, does Fuel Allowance increase, and who will qualify? Those are the figures worth putting against your own bills.
There is a reasonable case for targeted help. A pensioner heating an older bungalow with oil does not have the same costs as a high-income household in an A-rated home. There is also a case for cutting the tax on the fuel rural households actually use, and for making sure tax bands do not drag more workers onto 40% simply because wages have risen.
The State is still collecting enormous amounts of Corporation Tax. Households are still paying more to heat, drive and, in many cases, borrow. On October 6, the headline number matters less than what changes at the kitchen table. A few hundred euro will help. For a lot of households, it will not cover what has already been added to the oil tank, the pump and the energy bill.
john@ellisfinancial.ie
086 8362633
