Fuel Price Increase

Starting January 1, the price of petrol and diesel in Ireland is set to rise once again. This increase is driven by a mandate that requires a higher proportion of biofuels in petrol and diesel, adding 2 cents per litre to both fuels. This marks the fourth hike in motor fuel costs in just over a year, following previous increases in excise duty and carbon tax.

The December AA Ireland fuel price survey revealed that petrol prices have risen by 1 cent to an average of €1.74 per litre, while diesel prices have increased by 3 cents to €1.71 per litre. Factors contributing to these rising costs include increased shipping expenses due to unrest in the Middle East, higher refinery costs, and the weakening of the euro against the dollar.

In April, motorists experienced a 4-cent rise in petrol prices and a 3-cent rise in diesel prices as the government gradually restored the full rate of excise duty on motor fuels. This duty had been reduced in 2022 in response to the war in Ukraine, which had driven fuel prices to around €2 per litre. The full rate of excise duty was reinstated in August, adding further costs to fuel prices.

The latest increase in carbon tax, implemented in October, added 2.1 cents to a litre of petrol and 2.5 cents to diesel. Despite steady crude oil prices, the combination of these factors has led to a continuous rise in fuel costs for Irish motorists.

Fuel retailers and distributors have denied any profiteering, attributing the price hikes to external factors such as the cost of importing crude oil, which is priced in dollars. The euro’s depreciation against the dollar has made these imports more expensive. Additionally, the ongoing conflict in the Middle East has disrupted supply chains, further driving up costs.

Taxpayer Relief

On a more positive note, taxpayers in Ireland are set to benefit from several budget changes that take effect from January 1. These changes are designed to provide financial relief and boost disposable income for many individuals and families.

One of the key changes is the increase in the standard rate income tax band, which will rise by €1,500. This adjustment means that taxpayers will be able to earn more before being subjected to the higher tax rate, resulting in potential savings for many workers.

Additionally, the personal tax credit and the employee tax credit will both increase by €100. These credits directly reduce the amount of tax payable, providing further financial relief to taxpayers. The home carer tax credit will also see an increase of €100, benefiting families who care for dependents at home.

For social welfare recipients, there is good news as well. The weekly social welfare payments will increase by €12, providing additional support to those who rely on these payments. The fuel allowance, which helps low-income households with heating costs, will also see an increase.

The state pension will increase to €289.30 a week, a €12 hike. Finance Minister Jack Chambers stated that the changes to personal income taxes would support low- and middle-income earners. From today, the Government is increasing the main tax credits – the personal, employee, and earned income credits – by €125 each. This means the maximum employee tax credit for this year will be €2,000 for a single person.

There are also increases in the home carer tax credit and the single person child carer tax credit by €150 each, and increases in the incapacitated child tax credit and blind person’s tax credit by €300 each. The dependent relative tax credit will see an increase of €60.

If you are married or in a civil partnership and both of you have PAYE income, you are both entitled to claim the employee tax credit. There is also a €2,000 increase in what is called the standard rate cut-off point, meaning workers will be able to earn more before paying the top tax rate of 40%. The Universal Social Charge (USC) middle rate has been reduced from 4% to 3%, applying to income between €25,000 and €70,000. The entry threshold to the new 3% USC rate is being increased by €1,622 to €27,382, in line with the increase to the national minimum wage. This means that a full-time worker on the minimum wage will get an increase in their net take-home pay of €1,424 a year. A single person earning €20,000 or less this year will now be outside the income tax net.

Despite numerous government reforms aimed at reducing insurance costs, premiums continue to climb. The introduction of the Personal Injury Guidelines, which aimed to lower compensation awards for minor injuries, has not curbed the upward trend in insurance costs. The Alliance for Insurance Reform has highlighted that these increases are occurring even as insurers report record profits.

Brian Hanley, the chief executive of the Alliance for Insurance Reform, pointed out that while the cost of labour and parts has contributed to the rising premiums, it does not fully explain the extent of the increases. He emphasised that injury awards have decreased since the new guidelines were implemented, yet premiums continue to rise.

The rise in motor insurance premiums is part of a broader trend of increasing insurance costs in Ireland. Health insurance costs have also seen a significant increase, rising by 12% in the year to September, following multiple hikes by major providers such as VHI, Laya, and Irish Life Health. Home insurance rates have similarly increased by 7% over the same period.

Insurers argue that the rise in premiums is due to an increase in claims and the higher costs associated with repairing damaged vehicles. However, consumer groups and business organisations have accused the industry of failing to pass on the savings from government reforms to consumers. They argue that the industry is profiting at the expense of motorists, homeowners, and businesses.

Insurance Ireland, the industry lobby group, has defended the insurers, stating that the figures published by the Central Bank show that insurers have followed through on their commitment to pass on the benefits of the Personal Injuries Guidelines to consumers. They claim that the average written premium has only increased slightly, by 0.5%, to €561 in the first half of last year.