Budget 2024 Ireland: Key Takeaways for Employers & Employees

Wondering how Ireland’s Budget 2024 will impact you?

The Irish Minister for Finance, Michael McGrath, rolled the budget out on 10th October 2023, and it's packed with updates. 

Whether you're receiving a paycheck or managing a team, these changes are set to make a difference.

Our comprehensive guide distils the key takeaways from the complex policy and financial changes introduced. We’ll break down exactly how Budget 2024 may impact your job and personal finances.

Further Reading

• Discover popular Employee Benefits in Irish Startups and how to navigate them as an employer.

• Find out how Private Health Insurance can enhance your medical coverage in Ireland.

• Want to offer Irish Occupational Pensions? Check out our in-depth guide for everything you should know.

Budget 2024 Ireland: The Numbers at a Glance

Before we delve into the specifics, let's take a peek at some key numbers that offer a big-picture overview:

• The Irish government has earmarked a €14 billion spending package for the 2024 Budget.

• The budget includes €2.3 billion for temporary support and energy credits to ease the cost of living and support businesses.

• The government has allocated €25.2 billion to the Department of Social Protection for 2024.

• The budget sets aside €22.5 billion for health services, which is over €1 billion more in additional funding than last year.

• The total income tax package is worth €1.3 billion, with reduced personal income taxes for most individuals.

1. Changes in Social Contribution Rates

As an Irish citizen, you contribute to social insurance through deductions made by your employer.

Let's explore changes related to social contributions in the Budget 2024.

A. Pay Related Social Insurance (PRSI)

PRSI is a contribution that both employees and employers make towards the cost of social insurance benefits and pensions. 

The PRSI contribution can vary based on factors such as employment status, employee’s income, and PRSI class. 

• The change in PRSI Rates: All PRSI contribution rates will increase by 0.1% starting 1st October 2024. The 0.1% increase generally applies uniformly across PRSI classes.

• Impact: This slight increase will result in higher deductions from employee paychecks and increased employer contributions. Employers should prepare for payroll system updates, and employees may notice a minor reduction in their net salary.

B. Universal Social Charge (USC)

USC is a tax on gross income above certain thresholds, separate from income tax and PRSI.

• The changes in the rate of USC:

  • Increase in Upper Limit: Specifically, the upper limit of the 2% USC band will increase by €2,840. This means you can earn more income within the 2% band before a higher USC rate is applied to your earnings. 

  • Rate Reduction: The 4.5% USC rate, applicable to employees in the income bracket of €22,900 - €70,044, is reduced to 4%. 

• Impact: 

  • These changes aim to reduce the overall tax burden, potentially increasing take-home pay for many employees.

  • Employers must adjust their payroll systems to ensure correct deductions.

  • This adjustment in the USC band also ensures that full-time employees on minimum wage (working a standard 39-hour week) will remain within the lower 2% USC rate. This change effectively prevents these workers from being pushed into a higher tax bracket due to the wage increase. (We’ll cover the changes to the Irish National Minimum Wage later.)

2. Pensions and Retirement Benefit Changes

A. Flexible State Pension Age

Starting 1st January 2024, eligible employees have the flexibility to claim State Pension (Contributory) between ages 66 and 70, a shift from the previous fixed age of 66.

This allows you to work longer and potentially increase your pension through continued PRSI contributions.

B. Social Welfare Pensions

Starting 1st January 2024, the following changes will apply to the Irish State Pension:

• State Pension (Contributory)

  • Maximum rate for individuals aged 66-79 years: Increased by €12, from €265.30 to €277.30 per week.

  • Maximum rate for individuals aged 80 and over: Increased by €12, from €275.30 to €287.30 per week.

  • Extra payment for an adult dependent under 66: Increased by €8, from a maximum rate of €176.70 to €184.70 per week.

  • Extra payment for an adult dependent aged 66 or above: Increased by €10.8, from a maximum rate of €237.80 to €248.60 per week.

  • Extra payment for a child dependent: Increased by €4, from €42 to €46 per week for children under 12, and €50 to €54 per week for 12 and above.

• State Pension (Non-Contributory)

  • For individuals aged 66 and over: Increased by €12, from €254 to €266 per week in 2024.

  • For individuals aged 80 and over: Increased by €12, from €264 to €276 per week in 2024.

  • Extra payment for an adult dependent under 66: Increased by €7.9, from a maximum rate of €167.80 to €175.70 per week.

  • Extra payment for a child dependent: Increased by €4, from €42 to €46 per week for children under 12, and €50 to €54 per week for 12 and above.

Note: A qualified adult dependent over 66 is not eligible for State Pension (Non-Contributory). When they turn 66, they can apply for State Pension (Non-Contributory) in their own right.

C. Long-term Carers' Contributions

If you've been providing full-time care for over 20 years (1,040 weeks), you're now eligible for a special Long-Term Carers Contribution to your PRSI record. 

This addition could help you qualify for the State Pension (Contributory).

D. Transition to Total Contributions Approach (TCA)

Starting January 2025, the Irish government will begin a phased transition from the Yearly Average Method to the Total Contributions Approach (TCA) for pension calculations, focusing on total lifetime contributions.

Here’s how this may impact you:

• Employees: The switch to TCA ensures that every contribution throughout your career counts towards your pension. This could benefit those with irregular work patterns or career breaks. It might motivate employees to work longer and contribute consistently for a more substantial pension.

• Employers: You won't face direct financial impacts but must update payroll systems for precise contribution tracking. You should also be prepared to guide your staff on how these changes affect their pension, particularly for those with varied work histories.

Note: There were no changes concerning private pensions in Budget 2024. However, you could expect minor changes in the Finance Bill 2023, which may involve recommendations from the Inter-Departmental Pensions Reform & Taxation Group (IDPRTG).

2. Changes Related to Health Insurance

While Budget 2024 doesn't directly introduce major changes to health insurance schemes for employers and employees, you should still be aware of some key impacts:

• Reduced USC for Medical Card Holders: If you have a medical card issued by the Health Service Executive (HSE) and your annual income is under €60,000, you'll continue to benefit from lower Universal Social Charge rates until the end of 2025.

• Free Contraception Expansion: Starting January 2024, women up to the age of 31 will be eligible for free contraception, offering greater financial support and access to vital healthcare for more Irish women.

• Boost for Disability Services: There's an extra €64 million for services helping people with disabilities. This means better care and support if you or someone you know needs it.

• COVID-19 Spending Continues: The 2024 Budget allocates €1 billion for ongoing COVID-19 measures, including vaccinations, testing, and hospital support. While this doesn't directly impact health insurance, it could indirectly affect healthcare utilisation and may influence future insurance premiums.

• Significant Focus on Mental Health: A huge €1.3 billion is going into mental health services. This could mean better access to mental health care for you or your colleagues.

• Boost in Elderly Care Support: With €2.6 billion for older people's services, if you're caring for an elderly family member, there might be more support available for you.

• Dementia Care: There's funding for special weekend clubs for people with early-onset dementia, aiming to provide support for families dealing with dementia.

Adjustment in Tax Relief at Source for Health Insurance

A notable change, not stemming from Budget 2024 but impacting employers and employees, is the tax relief at source (TRS) rate adjustment by the Revenue Commissioners. 

Starting January 1st, 2024, the rate has decreased from 20% to 19% for some insurance providers like Irish Life Health (ILH) and Laya Healthcare. The Revenue Commissioners assess the rate on a company-by-company basis, so it might not be the same for all Irish health insurance providers.

What does this TRS rate reduction mean for you?

This reduced TRS rate could translate to slightly higher monthly premiums for employees and employers (if they pay premiums on their employees’ behalf, i.e., if they offer health insurance as a benefit-in-kind).

In the latter case, this would also mean employees will claim a slightly lower amount in tax credits, effectively increasing their net cost of health insurance.

3. Other Social Welfare Benefits

The Budget 2024 also introduces changes to other social welfare schemes, such as:

• Christmas Bonus: In December 2023, the government paid a 100% Christmas Bonus to eligible social welfare recipients, providing substantial financial support during the holiday season.

• Child Benefit Extension: Starting September 2024, Child Benefit will include children aged 18 who are in full-time education, extending financial support to families with student children.

• Working Family Payment Adjustments: From January 2024, the income limits for the Working Family Payment increased by €54 across all family sizes, making this benefit more accessible to a broader range of families. 

• Parent’s Benefit Extension: An extra two weeks of bonding time arrives with the extended Parent Benefit (from 7 to 9 weeks starting August 2024), providing precious moments to adjust and nurture in those early days after birth.

• Free Travel Scheme Expansion: From July 2024, the Free Travel Scheme will include people medically unfit to drive, enhancing mobility and independence for those unable to drive due to medical reasons.

• Employment Programmes Boost: Programs supporting individuals seeking to re-enter the workforce get a financial nudge — Community Employment (CE), Tús participants, and others receive a €12 weekly increase from January 2024. 

• Carer’s Allowance Adjustments: In June 2024, the income disregard for Carer's Allowance will rise to €450 for single individuals and €900 for couples, offering greater financial flexibility and support to carers.

4. Changes in Taxation

The Budget 2024 brings some significant tax changes, impacting both employers and employees in Ireland. Let's unpack the essentials.

A. Income Tax Changes

• Tax Rates Unchanged: The income tax rates remain at 20% and 40%.

• Increased Standard Rate Tax Band: The amount you can earn before paying the higher tax rate increases by €2,000 to €42,000 for single individuals. There are proportionate increases for married couples and civil partners.

• Tax Credit Boost: The Personal Tax Credit, Employee Tax Credit, and Earned Income Tax Credit all increase by €100 to €1,875. The Home Carer Tax Credit rises by €100 to €1,800, and the Single Person Child Carer Credit goes up by €100 to €1,750. The Incapacitated Child Tax Credit increases by €200 to €3,500.

Impact: These tax relief measures mean more take-home pay for employees, with increased thresholds reducing the tax burden.

B. Business Taxation Changes

• Research and Development (R&D) Boost: The available R&D tax credit increases from 25% to 30% for 2024 expenditure, and the first-year payment threshold rises from €25,000 to €50,000.

• 15% Minimum Effective Tax Rate: Get ready for a new global rule where certain large companies must pay at least a 15% tax on their profits as part of an international effort to ensure big businesses pay their fair share.

• Foreign Sourced Dividends: Plans to develop a territoriality/participation exemption, with legislation expected in the Finance Bill 2024.

• Revised Bank Levy: Introduction of a revised bank levy aiming to raise €200 million in 2024.

• Film Relief Increase: The maximum qualifying expenditure for Film Relief under Section 481 increases from €70 million to €125 million, subject to State aid approval. This change enables film industry employers to invest significantly in local talent, potentially boosting job prospects.

• Angel Investor Incentive: Budget 2024 introduces a reduced rate of Capital Gains Tax (CGT) of 16% for Angel Investors in innovative Small and Medium-sized Enterprises (SMEs). This benefit applies to profits up to €3 million, promoting private investment in growing businesses.

• Extension of Accelerated Capital Allowances Scheme: The 2024 Budget extends the Accelerated Capital Allowances for Energy Efficient Equipment to 2025. This regime allows businesses to claim faster tax deductions on energy-efficient equipment purchases, supporting eco-friendly investments and operational cost savings.

Impact: These business tax measures, particularly related to R&D, energy, and CGT relief, provide incentives for investment and innovation. The bank levy and corporate tax changes may impact financial planning for businesses.

5. National Minimum Wage

The Irish government raised the National Minimum Wage from €11.30 to €12.70 per hour from 1st January 2024. 

The government sets the National Minimum Wage in Ireland as the legal minimum hourly rate employers must pay their employees, ensuring a basic standard of living for workers.

Impact:

• For Workers: This increase means a significant boost in their hourly earnings, providing greater financial security and support in the face of rising living costs.

• For Employers:

  • Employers must pay their employees at least the new minimum wage of €12.70 per hour.

  • Businesses need to update their payroll systems to reflect this increased rate.

  • Employers should maintain accurate records of hours worked and wages paid to ensure compliance with minimum wage laws.

6. One-Off Cost of Living Supports

The Budget 2024 introduces several one-off cost of living supports, including boosts to existing welfare payments. These supports spread across late 2023 and early 2024, which means some are already reaching Irish citizens (as of January 2024).

• Fuel Allowance Payment: A one-off payment of €300 in November 2023 to those receiving Fuel Allowance.

• Working Family Payment: A one-off payment of €400 to the Working Family Payment recipients in November 2023.

• Child Benefit Double Payment: Twice the usual payment amount for families with children eligible for Child Benefit, effectively doubling the payment for each child In December 2023.

• Payment for Qualified Child Increase: A one-off payment of €100 per qualified child in November 2023 to families with dependent children who qualify for certain benefits, like long-term Illness Benefit.

• Living Alone Increase Payment: A one-off payment of €200 was made to those receiving the Living Alone Increase.

• Disability Allowance, Invalidity Pension, and Blind Pension Payment: A one-off payment of €400 to recipients of these benefits.

• Carer’s Support Grant or Domiciliary Care Allowance: On 30 November 2023, a one-off payment of €400 was made to recipients of these allowances.

Every once-off measure above is part of the Irish government's response to ease the financial burden on individuals and families due to the rising cost of living.

7. New Funds and Schemes

The Budget 2024 introduces some exciting new initiatives.

• Increased Cost of Business Scheme (ICOB): A helping hand for businesses facing rising costs! This €250 million grant will reach up to 130,000 small and medium businesses, giving them a much-needed boost to weather the storm and keep creating jobs.

• Smart Regions Enterprise Innovation Scheme: The scheme empowers regional businesses with €145 million for innovation and growth, building a balanced nationwide economy.

• The Infrastructure, Climate and Nature Fund: Minister Michael McGrath launched this fund to maintain consistent investment in infrastructure, even during an economic downturn. The Irish government plans to invest €2 billion annually from 2024 to 2030, totalling €14 billion, ensuring alignment with environmental goals.

Next, let's break down Ireland's 2024 economic outlook in light of the latest budget package.

Future Projections and Economic Outlook for Ireland

The Irish government predicts continued economic growth into 2024, though at a moderate pace compared to previous years.

The Budget aims to tame rising prices while crafting policies that allow the economy to grow but avoid going off the rails. It also reflects a careful approach to economic growth, with a focus on maintaining stability and supporting key sectors.

Jobs and Business: What's Coming Up?

The 2024 Budget's €979 million allocation to the Department of Enterprise, Trade, and Employment marks a significant increase. This boost indicates the Irish government's intensified efforts to stimulate economic growth and job creation.

The 2024 Budget also introduces helpful programs, like R&D and energy-related reliefs, to help businesses with energy costs. 

Plus, there's a bigger tax break for research and development, now at 30%, making it easier for businesses to innovate and grow.

And if you’re an employer implementing these budget changes in your organisation, Kota can help simplify the process.

What’s Kota?

Kota is a powerful digital platform that lets you manage and scale employee benefits, like health insurance and pensions, globally from one centralised place. 

It easily syncs with your HR system for benefits that operate on autopilot, ensuring compliance and ease.

Join Kota today for effortless employee benefits management!

Sources:

https://www.citizensinformation.ie/en/money-and-tax/budgets/budget-2024/

https://www.citizensinformation.ie/en/whats-new/budget-2024/

https://www.gov.ie/en/publication/f8295-budget-2024/