Dáil Éireann Debate, Tuesday - 21 April 2026
326. Deputy Naoise Ó Muirí asked the Tánaiste and Minister for Finance the progress being made to index credits and bands to prevent an increase in the real burden of income tax; the estimated amount this will cost; and if he will make a statement on the matter. [26897/26]
View answerThe ‘Programme for Government 2025: Securing Ireland’s Future’, contains specific undertakings with regard to personal taxation, it commits to “implementing progressive changes in taxation if the economy remains strong, including indexing credits and bands to prevent an increase in the real burden of Income Tax while in the event of an economic downturn and unexpected deterioration in the public finances we would postpone changes to Income Tax credits or bands, as we did in Budget 2021”.
As the Deputy will be aware, to ease the burden facing average and middle-income earners, over successive Budgets the previous Government substantially increased the entry point to the higher rate of income tax for all earners by €8,700 or c. 25 per cent. The main tax credits have also been increased by €350, or c. 21 per cent. In line with the Government policy of ensuring full-time workers on the minimum wage remain outside the charge to the top rates of USC the ceiling of the 2 per cent USC rate band was increased by €6,898, or 34 per cent, from 2020 to 2025. Budgets 2024 and 2025 also cumulatively reduced the 4.5 per cent rate of USC to 3 per cent.
Broadly, the income tax measures implemented over the period of the last Government are expected to be in line with wage growth.
Budget 2026 was designed to boost our economic resilience and protect jobs in a deeply uncertain international economic environment. However, it also provided a range of supports to individuals, families and businesses. In particular, the Rent Tax Credit, introduced in Budget 2023, has proven to be a very meaningful support for renters. The credit was extended for a further three years to the end of 2028. The ceiling of the second USC rate band was increased by €1,318, from €27,382 to €28,700. This has ensured that a full-time worker on the minimum wage who benefits from the increase in the hourly minimum wage rate from €13.50 to €14.15 remains outside the highest rates of USC, while it also has provided a modest benefit to all workers whose income is above that amount. The 9 per cent VAT on gas and electricity bills was extended until the 31 December 2030, recognising that energy prices remain high and to help alleviate energy cost pressures for households.
All of these measures will have a positive impact.
Finally, as the Deputy will appreciate, decisions regarding tax measures are normally made in the context of the annual Budget and Finance Bill process. Such decisions must have regard to the sound management of the public finances and the competing priorities. However, Budget 2026 was the first of five Budgets to be delivered by this Government, and the Government remains committed and will stand by the Programme for Government commitment to make progressive changes to personal income tax, if the economy remains strong.
