On October 11, 2016 the Irish Minister for Finance, Mr. Michael Noonan, announced his Budget. One of the notable tax changes is the reduction of the USC rates, €335m have been allocated for this particular purpose.
The Universal Social Charge which came into effect on 1 January 2011 as temporary measure is a tax payable on gross income, including notional pay, after any relief for certain trading losses and capital allowances, but before pension contributions. All individuals are liable to pay the USC if their gross income exceeds the threshold of €13,000.
From January 1, 2017 the three lower rates of USC will be reduced by 0.5%. There is also an adjustment to the bands to ensure that the salary of a full time worker on the minimum wage remains outside the top rates of USC. Income of €13,000 or less is still exempt from USC.
In all other cases, the following rates will apply for 2017:
- the first rate of USC will be 0.5% on income over €12,012
- the second rate will be 2.5% on income between €12,012 and €18,772
- the third rate will be 5% on income between €18,773 and €70,044
The higher rates of USC on income over €70,044 are unchanged. There was also a small increase in the level of income at which the 5% rate of USC will be paid. This has increased from €18,668 to €18,772. Medical card holders and people over 70 years of age who earn below €60,000 will pay a maximum USC rate of 2.5%.
The USC is estimated to be imposed on 1.66 million taxpayers next year and the majority of the workers who pay the Universal Social Charge earn less than €40,000. Though small, these measures are designed to improve the net salary of low and middle income earners and will benefit all taxpayers. Abolishing the USC would be not possible at the moment as to do so would put vital services at risk. However, said Fianna Fáil, should the economy continue to recover, there will be scope to continue to ease the burden imposed by the USC.