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.

Cost-of-Living Supports

One of the key components of Budget 2025 is a substantial cost-of-living package worth approximately €1.5 billion. This package is designed to provide relief to households struggling with rising living costs. It includes lump-sum payments to welfare recipients and new energy credits, although these will be less generous than the previous year’s payments. Despite the ongoing need for such supports, some economic think tanks argue that the current economic conditions may not justify these measures.

Tax Reductions

A significant highlight of the budget is the introduction of a major income tax and Universal Social Charge (USC) reduction package, amounting to €1.4 billion. The government aims to ensure that no individual earning the average wage will be subject to the higher rate of income tax. This will be achieved through adjustments to the tax bands and an increase in the tax credit. These changes are expected to provide substantial relief to middle-income earners and stimulate economic activity.

Social Welfare Enhancements

Social welfare recipients are set to benefit from a range of enhancements. The budget includes a €12 increase in weekly payments for pensioners, carers, and people with disabilities. Additionally, there will be two social welfare bonus payments before the end of the year, providing further financial support to vulnerable groups. The government is also focusing on addressing child poverty, with measures aimed at supporting children in need. However, a two-tier child benefit system has been ruled out, ensuring that all children receive equal support.

Energy Credits

Households can look forward to another round of energy credits, although these will be less than the three payments of €150 provided last year. The government is considering phasing out these subsidies as the worst of the energy crisis has passed. This move reflects a shift towards more sustainable and long-term solutions for energy affordability.

Inheritance Tax and Rent Tax Credit

In response to rising property prices, the inheritance tax threshold is expected to increase from €335,000 to €400,000. This adjustment aims to alleviate the financial burden on families inheriting property. Additionally, the rent tax credit, which was increased to €750 last year, is likely to rise to €1,000. This measure is intended to provide relief to renters facing high housing costs.

Minimum Wage

The Low Wage Commission has recommended an increase in the minimum wage to €13.70 per hour. While the government is expected to follow this recommendation, it is not yet guaranteed. If implemented, this increase will benefit low-income workers and help address income inequality.

Public Spending and Infrastructure

Budget 2025 will include a spending package of €6.9 billion, focusing on public services and infrastructure. This includes pre-committed spending from previous budgets and new policies to be announced. The government aims to invest in critical areas such as healthcare, education, and transportation, ensuring that public services are adequately funded and improved.