Income tax reductions in Budget 2027
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What is the proposed new threshold for the higher‑rate income tax in Budget 2027?
The Irish Examiner is reporting this morning that the entry point for paying the higher rate of income tax is to increase to at least 46,000 euro in budget 2027. That will be announced next month as part of efforts to put money back into people's pockets. Louise Byrne is political correspondent. She has the story. She's on the line. Morning, Louise. Good morning, David. Discussion very much still underway. Obviously, we have to wait until October the 6th, I think it is, when the budget is revealed. Nothing confirmed yet, but we know that the tax package will be about one and a half billion euro. What are you hearing about how that's going to be spent?
So I think there's a lot of pressure on the government and in particular new finance minister, Simon Harris, who was obviously set to unveil his first budget.
How much extra money could high‑earners see in their paychecks from the tax‑band change?
And you might remember last year, David, there was real anger from people over the fact that there was no personal worker income tax package. in the budget. And even I know speaking to my friends, it's all they want to know about what's going to be unveiled in October 6th budget. So there's a lot of pressure on the government. So my understanding is that while discussions are still ongoing, it looks likely that the 40% cut off rate for the tax, the amount of income you have to earn in order to pay the 40% tax will increase from €44,000 to €46,000 at least Now, there may be a little bit of wiggle room to potentially go a little bit more. It's unlikely perhaps that it might go to 47 or 48, but it could go over slightly over 46,000.
That in and of itself would put €400 back in workers' pockets. The other thing the coalition will also be looking at is the tax credits and if there's any room to increase them. So my understanding of it is that when all that is decided, it could put just over €500 back in workers' pockets. Now, that is money. It's not additional money.
Will tax credits be increased and how might that affect workers’ take‑home pay?
It's just money, their own money that they're not paying tax on. But I think the way things are at the moment, people will be appreciative of anything.
Of course, it only applies to people who are paying the higher rate of income tax, which is a minority.
Well, yeah. And if you look at what the medium income is in this country, it's just over 48,000 euros. So there is a lot of people paying a lot less money than that. And I think when you look at those who are paying the 20 percent rate and you question what they are going to benefit. So the likelihood is they will benefit from the tax credits. If there is an increase to the minimum wage, we know the Low Paid Commission is looking and has recommended for the minimum wage to be increased by 79 cents from €4.15 an hour to €14.94 an hour. So they will benefit from that. And if that changes, there will also be a change to the USC rates. But you're right, this would predominantly benefit high income earners.
What impact could a minimum‑wage rise have on low‑paid workers and the overall tax system?
The people who get up early in the morning, as Simon Harris might refer to them as,
Indeed he might. Is there a question mark over whether the minimum wage increase would go ahead? Because normally I think the government tends to accept the recommendation.
It is something that is normally accepted and it will be a decision that's made by Cabinet in advance of the budget and then announced on budget day. Kind of speaking to people in government buildings, they're saying that it has to be weighed up in the context of the rising cost of businesses. And we've heard this a lot in recent months about how much businesses have had to increase their margins by, their spending margins by because of the high costs oftentimes are inflicted on them through government policies. So I think it would be a brave government to reject the recommendation from the Low Pay Commission. But that decision is still to be made. And there is a consciousness that businesses have many rising costs, including high energy
costs. Is there a bit of pulling and dragging between the two main coalition partners about who gets credit for whatever's in the budget?
Why is there tension between coalition partners over who gets credit for the budget measures?
There normally is.
Of course there is.
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Chapters
6 chapters
1
What is the proposed new threshold for the higher‑rate income tax in Budget 2027?
0:00–0:50
2
How much extra money could high‑earners see in their paychecks from the tax‑band change?
0:50–1:57
3
Will tax credits be increased and how might that affect workers’ take‑home pay?
1:57–2:49
4
What impact could a minimum‑wage rise have on low‑paid workers and the overall tax system?
2:49–3:52
5
Why is there tension between coalition partners over who gets credit for the budget measures?
3:52–4:28
6
Could early hype about tax cuts backfire once the actual figures appear on January pay‑slips?
4:28–5:57
Speakers
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