Tax changes, social welfare and childcare: Here's what we know about Tuesday's budget so far

WITH THE BUDGET just a few days away, the negotiations at government level are set to come down to the wire over the weekend. 

Opposition parties were out this week launching their alternative budgets, with a common theme running through all of them – the cost-of-living crisis and the rising cost of fuel. 

It is something the government will also try to keep to the fore, but with lots of budget kite flying in recent months, and big promises being made, it’s difficult to see how this year’s budget is going to make anyone happy. 

So what can we expect next Tuesday?

Income tax 

On income tax, we have already been told that tax cuts could be “modest” and will probably only amount to a “few hundred euros” for the average worker. 

• How much could you get back in your pocket with the potential new income tax cut?

It is expected the tax cuts won’t amount to more than €500, and that is probably being optimistic.

It is more than most probably felt in their pockets last year due to the government choosing not to index the tax bands, but substantially less than the €1,000 people had returned to them in 2024.

However, due to no adjustment in the tax bands last year, the question is will the government tinker with them enough to make any meaningful difference to people. 

Finance Minister Simon Harris has already said the rate at which people pay the higher rate of income tax is going to move, with speculation that it will be raised from €44,000 to €46,000.

Social Protection

Rumour has it that one of the big winners will be Social Protection Minister Dara Calleary. 

There has been talk this week about how much the pension will increase by, with the Taoiseach batting away suggestions that it might only rise by €7.50.

It’s expected the rise will be above that but could be lower than €10. There will be targeted supports though for older people with an expansion of the fuel allowance. 

Calleary has also said he would like to target those who are living on their own, which points to an increase in the Living Alone Allowance.

There is unlikely to be any increase to the child benefit payment. The minister has also already confirmed that the second tier of child benefit, which seeks to target low-income households, will not be introduced in this budget.

There is often a disagreement between Fianna Fáil and Fine Gael over increasing Jobseekers each year alongside other social welfare payments. Fianna Fáil is often of the view that it should, while Fine Gael ministers have argued in the past that it should not. That is one to watch.

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Childcare 

There has been lots of talk about how this year’s budget will make real moves towards getting to the election promise of childcare costing only €200 per month per child for parents. 

Children’s Minister Norma Foley has said this year will be a “breakthrough budget” in getting childcare fees down.

However, the minister has not specified by how much. 

“I believe I have the support to make a very significant cut, if you like, or advancement in terms of achieving that goal of €200 in this budget,” she said earlier this month. 

Harris confirmed to his parliamentary party this week that he intends to increase the Childcare Services Tax Relief threshold.

This relief is designed to encourage stay-at-home parents and people working part-time to provide childcare in their own homes.

The threshold has not increased since 2007.

The Tánaiste also said childcare costs will be tackled through both fee reductions and the tax system in budget 2027. 

Fuel and energy

When it comes to energy, the Taoiseach was pretty clear that he doesn’t think this year’s budget has the “capacity” for the roll-out of energy credits, but he has also said that nothing is off the table, so make that what you will. 

All the opposition parties have called for some form of energy credit for householders. 

What we can expect is carbon tax to be cut or significantly reduced on home-heating oil, with reductions on excise duty for petrol and diesel also set to be extended until next year.

As mentioned above, there will be an expansion of the fuel allowance.

Fuel Allowance is a payment to help with the cost of heating during the winter months, with payments of €38 per week starting in late September and ending in April. There’s been speculation that there could be a lump sum payment of around €160 rather than a weekly increase.

Energy Minister Daragh O’Brien told The Journal earlier this month that he wants to introduce new energy grants in the upcoming budget. However, he confirmed he has no plans to increase existing grants.

Housing

An increase in the rent tax credit has been signalled by the finance minister. 

The credit currently amounts to €1,000 for a single individual and €2,000 for a jointly assessed couple. There’s some expectation it should increase by at least €250.

One thing that sparked controversy in the run-up to the budget is Micheál Martin stating that he has a “favourable disposition” towards scrapping stamp duty for first-time buyers.

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 However, the finance minister was quick to shut down the discussion, stating that he has no plans to include it in this year’s budget.

Housing Minister James Browne has been pushing for an increase to the Help-to-Buy scheme by €20,000; however, this has also ruffled feathers.  

The existing Rent-a-Room scheme is set to get a boost. The scheme allows people to earn up to €14,000 a year tax-free if they rent out a room in their home to private tenants. It’s been hinted that this could rise to €20,000.

Inheritance tax 

Both Harris and Public Expenditure Minister Jack Chambers said that there was room in this year’s budget to progress with inheritance tax changes, but both men seemed to stress that it might not be a huge change. 

Under the current system, children can inherit up to €400,000 tax-free, while siblings, nieces and nephews fall under a €40,000 threshold. All other beneficiaries are subject to a €20,000 threshold before inheritance tax applies.

Chambers also ruled out an overhaul of the system that would see those without children being able to nominate a beneficiary, indicating that change would be around increasing the threshold.

Other items

The culture voucher for 16-year-olds which was set to be €100 that could be used in cultural and music venues has hit a snag, with the public expenditure minister telling Arts Minister Patrick O’Donovan that his budget ask for his department this year is too high.

The minister has been asked to resubmit his plan with a lower bid, so the voucher, if it is introduced, could be for a smaller amount.

The Irish Independent reported this week that women aged up to 37 could be able to avail of free contraception under the expanded scheme. 

In case you haven’t heard (we jest), the government’s new savings and investment account will be announced by Harris on budget day. We know a lot about it already, but more meat on the bones of the scheme will be laid out on Tuesday. 

The Irish Times reported last month that an increase in the tax on vapes might be on the cards. 

Harris said the tax collected since its introduction last November is more than €22 million.

Political leaders have been strong in their condemnation of vapes and have introduced legislation recently to curtail the market. This could be an easy win and a money generator for the government. 

The budget will be announced on Tuesday with statements beginning at 1pm.

The Journal will be bringing you all the latest on the day, from breaking news to analysis and breaking down the budget numbers so you don’t have to.