Emer Higgins (Dublin Mid West, Fine Gael)
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116. To ask the Minister for Finance if the change to the threshold for the higher income tax band introduced in Budget 2023 also applies to retired persons; and if he will make a statement on the matter. [49085/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy will be aware, Budget 2023 included a significant personal tax package with an estimated cost next year of over €1.13 billion. The Standard Rate Cut-Off Point, which is the entry point for the higher rate of income tax, is being increased by €3,200 from €36,800 to €40,000 for a single individual (8.7% increase), with commensurate increases in the bands applying to married persons and persons in civil partnerships. The main personal tax credits (personal credit, employee tax credit and earned income credit) are also being increased by €75 from €1,700 to €1,775 (4.4% increase), and the home carer tax credit is being increased €100 from €1,600 to €1,700 (6.3% increase).

Furthermore, the 2% rate band ceiling for USC will also be increased in line with the increase in the national minimum wage to ensure that a full-time adult worker who benefits from the increase in the hourly minimum wage rate of €10.50 to €11.30 will remain outside the top rates of USC. Further details can be located at the following link - www.gov.ie/en/publication/ccc22-budget-2023-taxation-measures/

I will bring forward legislative amendments in Finance Bill 2022 to give effect to the above measures from 1 January 2023. These measures will apply to all taxpayers, including retired persons, as appropriate to their individual circumstances and income levels.

Separately, there is an income tax age exemption for persons aged over 65 which means that single, widowed or surviving civil partners aged 65 or older do not pay any income tax if they earn less than €18,000 per annum with a threshold of €36,000 in place for a married couple or civil partners where one person is 65 years of age or older. The relevant income thresholds may be increased further if the individual has a qualifying child. The thresholds are increased by €575 in respect of both the first and second child, and €830 in respect of each subsequent child.

Marginal relief may be available where the individual’s or couple’s income exceeds the relevant exemption limit but is less than twice that amount. Where marginal relief applies, the individual or couple is taxed at 40% on all income above the exemption limit to a ceiling of twice the exemption limit. Once the income exceeds twice the exemption limit marginal relief is no longer available and the individual pays tax under the normal tax system.

It should be noted, however, that where the individual’s income is greater than the exemption limit but below twice that limit, the taxpayer is always given the benefit of the more favourable treatment as between the use of marginal relief or the normal tax system of credits and bands.

In the event that the Deputy’s question is specifically referring to age exemption for persons aged over 65, Budget 2023 did not include an increase to the current thresholds. While I have no plans to the change the thresholds in relation to exemptions currently granted to persons aged 65 and over, it must be noted that the current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers.

Persons aged 65 or over may also avail of the age tax credit, which currently amounts to €245 per year for single persons or €490 per year for married couples or civil partners. Reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 or less.

Additional guidance on the range of tax credits and reliefs that may be available for individuals over 65 years of age can be found in Tax and Duty Manual Part 15-01-26, which can be located at the following link – Tax and Duty Manual: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-26.pdf.