Jack Chambers (Dublin West, Fianna Fail) | Oireachtas source

This section of the Bill amends section 531AN of the Taxes Consolidation Act 1997 to give effect to the two changes to the universal social charge that were announced in budget 2025. First, the ceiling of the second rate of USC, that is, the 2% rate, will increase to take account of the increase in the national minimum wage. It is increasing by 80 cent per hour, that is, from €12.70 per hour to €13.50 per hour, with effect from 1 January 2025. This continues the Government's policy of ensuring full-time workers on the minimum wage will remain outside the charge of the top rates of USC. Accordingly, the ceiling of the 2% USC rate band will increase by 6.3%, from €25,760 to €27,382 with effect from 1 January 2025. Second, the 4% rate of USC will be reduced to 3%. This represents the second consecutive reduction to this rate. This change will benefit all those earning over €27,382 in 2025. The cost of this USC package is €470 million in 2025 and €540 million in a full year.

Taken together with the income tax changes, which are provided for in section 3 and which we will speak about shortly, these changes will support low and middle-income earners and builds on the progress already made in recent budgets. Taking account of the cumulative USC changes over the lifetime of this Government, the 2% ceiling band has been increased by 34%, or by €6,898 from €20,484 to €27,382.

The USC middle rate has also been reduced by 1.5 percentage points from 4.5% to 3%. Let us take the wider changes we have seen in the context of a single person employee and their average effective tax rate. In 2020, a person on €25,000 was paying 12.4%; in 2025, 9.4% will be their average effective tax rate. Someone on €35,000 was paying 17.1%; next year that will be 14.4%. Someone on €40,000 was paying 20.9% in 2020 and will pay 16% in 2025. These are clearly progressive changes. Reducing the income tax burden and the USC have been central to what this Government has designed and delivered in the context of our overall tax package and this reduction in USC will be important in the overall tax people pay in 2025 and it is a welcome change.

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