Budget 2027: Fifteen years on, it’s time to rethink the USC

01 Oct 2026, 06:00 by Nick Charalambous, https://www.thejournal.ie/author/nick-charalambous/ · TheJournal.ie

Nick Charalambous

WITH LESS THAN a week to go until Budget 2027, the government knows it must deliver a budget that puts more money in the pockets of working people struggling with the cost of living.

The budget kites have been flying high for a while now, and we know there’ll be changes to the point at which workers start paying the 40% rate of income tax. We know that measures to lower childcare fees are being discussed, that a rent tax credit is on the cards and of course we know that details of Minister Simon Harris’ much anticipated savings and investment scheme will be announced.

But the wind has failed to take one particular kite. 15 years after the Universal Social Charge was introduced, why are we not talking about making real reforms to what was once an emergency measure?

‘The temporary tax’

USC came into effect in January 2011, when Ireland was in a difficult financial position. It replaced the income levy and health levy and helped broaden the tax base. Ireland now is a very different country, yet USC is still a permanent fixture on the payslip.

I’ve worked as a financial adviser for more than 25 years. In my experience, most people don’t examine income tax, USC and PRSI as separate questions. They look at what they earn and what arrives in their bank account. I can’t blame them, we’ve made the taxation of work difficult to follow.

Let’s consider one of the most prominent pre-budget kites, the point at which a single person starts paying the higher rate of income tax. It’s currently €44,000, raising that threshold by €2,000 would save up to €400 a year for someone earning enough to receive the full benefit.

Don’t get me wrong, few people would turn down €400, but what does that figure tell them about their finances? They still pay USC and PRSI. Their rent or mortgage may have risen, and we know the cost of food and energy is only going in one direction. A tax change can leave someone better off than they otherwise would have been while still leaving them feeling worse off than last year.

The bottom line

When I meet a client, I look at their overall financial position, and I think we should judge Budget measures in much the same way. The number that matters most to a household is what it’s left with, and what that money can buy.

That doesn’t mean the answer is to scrap USC overnight. Let’s be honest, it would make a compelling headline, but the charge raises billions of euros. Removing it would mean having to replace that revenue in some way, namely reducing spending and cutting public services. Anyone calling for abolition should be honest about that choice.

However, this shouldn’t end the discussion about how the government collects revenue. If the government believes the current arrangement remains the fairest option, it should explain why.

The complexity extends beyond the payslip. People are expected to navigate a whole range of tax and tax credits often alongside rules that change from one Budget to the next. A new Government-backed savings and investment account will compound this. I support helping people save and invest, but its eventual tax rules need to be clear enough for ordinary savers to understand.

And we must be honest with people, there is another reason why this conversation matters now, and that relates to inflation. People hear that their salary has increased and assume they should feel better off. But if your salary rises while food, energy, insurance and housing costs are also increasing, the improvement in your actual standard of living may be considerably smaller.