Tax bills to rise by 10% next year

Tax bills to rise by 10% next year

Tax bills are set to rise by more than 10% in 2013, even without any increase in income tax, an analysis by Grant Thornton has estimated.

PAYE households may have to pay over €3,000 in additional taxes next year through a combination of increased PRSI and Universal Social Charge contributions, reduced pension relief and a property tax, Grant Thornton said.

Grant Thornton Tax Partner Peter Vale said: “There will be a lot of talk in the Budget about income tax rates not being increased, but the reality is that disposable incomes are going to take a major hit even if the headline top rate of income tax stays at 41%.

“Under every scenario we have run, tax bills rise by more than 10%,” he said.

Grant Thornton is expcting the following changes in the budget:

  • An increase in the Universal Social Charge (USC) from 7% to 8%, and to 10% on income above €100,000.
  • An extension of employee PRSI to cover non-employment income such as dividends and rents on property investments.
  • A reduction in tax relief on pension contributions from 41% to 20%.
  • A property tax from July 2013, levied as 0.25% of a property’s value.

Grant Thornton also expects increases to motor tax rates and higher deposit interest retention tax.

“It is difficult to envisage a Budget next month that is not painful for everybody,” said Vale.

“With at least €3.5bn being sought from expenditure savings and tax increases, we will all be feeling considerably less well off on December 5th. A big concern has to be how badly the changes impact consumer demand in 2013, thus limiting potential for growth in the economy.”

Leave a Reply