herald

Monday 20 August 2018

Dan White: Opening our pay packets was a shock, we’re losing around €150 each month

Dan White answer your financial questions.

WHEN my husband and I examined our January payslips we were shocked. While we knew that the tax increases announced in the Budget would reduce our income we had no idea that it would cost us so much. Both of us work in the private sector and our combined annual incomes are about €75,000.

We also have two children. Based on our January payslips we will be paying over €300 a month in universal social charge and will be almost €150 per month worse off. Can this possibly be true and is there anything we can do about it?

NUALA

Unfortunately it is, and there is very little, if anything, which they can do about it.

Nuala and her husband were among the hundreds of thousands of taxpayers who got a very nasty shock when they opened their January pay packets.

While all of us were vaguely aware that the Budget tax increases would hurt, it is only now that their full impact has been felt.

Not surprisingly, the new universal social charge (USC) which is being levied at 7pc on all income over €16,016 and which replaces the old income and health levies, is being blamed by most taxpayers for the new, lighter pay packets.

While the USC certainly doesn’t help matters, the main damage being done to the pay packets of middle-income earners such as Nuala and her husband is, in fact, due to the income tax changes.

LEVIES

In the December Budget, Brian Lenihan reduced most tax credits by 10pc and also narrowed the standard 20pc income tax rate band by 10pc.

As a result, by my calculations, Nuala and her husband will see their joint income tax bill rise from €8,142 in 2010 to €10,374 this year.

They will also pay €3,888 USC in 2011. While that’s more than €300 per month it is still less than the combined €4,500 which they paid in health and income levies in 2010.

Cynics might be forgiven for wondering if the USC was Brian Lenihan’s clever little plan to divert our attention to the huge income tax increases in the Budget.

However, Nuala is right, she and her husband’s after-tax income will both be down sharply this year.

When their income tax, USC and PRSI are all totted up their total tax bill will be €16,733. This will be up by €1,620 (€135 per month) on the €15,114 which they paid in 2010.

And that isn’t the end of the bad news. With two children, their child benefit is down by €20 per month, a further €240 per year.

Virtually all income is subject to the USC. The only exceptions are interest on deposits from which DIRT has already been deducted and social welfare payments.

However, any benefit here has been largely wiped out by the increase in the DIRT rate from 25pc to 27pc and by the cut in child benefit.

With money tight and motor fuel prices rising, it’s getting extremely expensive to fill up at the pumps. I try to shop around for the cheapest prices but with prices seemingly moving up all the time that’s not easy. Other than driving around for miles, is there any way of keeping track on who has the lowest petrol and diesel prices?

SHANE

With the average price of a litre of diesel now up to 135.2 cent and petrol at 142.6 cent, according to the latest AA figures, filling up at the pumps has never been more expensive.

With wide price variations between fuel stations, even those in the same area, this makes it even more important than ever that motorists shop around.

CHEAPEST

In my experience the best guide to sourcing the cheapest petrol and diesel is the pumps.ie website.

This is regularly updated will let you know which are the cheapest fuel stations.

If you drive a diesel-engined car another less scientific but generally effective method of finding the cheapest prices is to keep an eye out for fuel stations with lots of taxis at the pumps.

In my experience taxi drivers have an unerring instinct for the cheapest fuel prices.

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