Emer Higgins (Dublin Mid West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

67. To ask the Minister for Finance his plans to increase the tax-free allowance for pensioners to bring it in line with the new allowance for workers. [11283/23]

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Budget 2023 included a personal income tax package amounting to €1.13 billion in 2023. Budget 2023 did not introduce a new tax free allowance for workers, instead the Standard Rate Cut-Off Point for single persons was increased by €3,200 or 8.7 per cent to €40,000, with commensurate increases for persons who are married/in civil partnerships. The main tax credits – personal tax credit, employee tax credit and earned income credit - were all increased by just over 4.4 per cent or €75 each to €1,775. The home carer tax credit was also increased by €100 to €1,700, a 6.3 per cent increase.

The ceiling of the band for the 2 per cent rate for USC was also increased by €1,625 from €21,295 to €22,920 in line with the increase in the national minimum wage. The reduced rate of USC concession for medical card holders who earn less than €60,000 per annum was extended for a further year.

The Deputy refers to increasing the tax free allowance for pensioners, which I assume relates to the age exemption limits for persons aged 65 or over. Currently, such individuals are exempt from income tax if their total income is less than €18,000 for single persons and €36,000 for married couples or civil partners. Marginal relief is available where the total income is less than twice the relevant exemption limit. Budget 2023 did not provide for an increase in the age exemption thresholds and there are no current plans to increase these thresholds.

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. Reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 or less. Furthermore, the State Contributory Pension and the State Non-Contributory Pension are not chargeable to USC or PRSI.

The recent Commission on Taxation and Welfare recommended that age should be removed as a factor for determining the charge to Income Tax and USC as it narrows the tax base and breaches the concepts of horizontal equity and inter-generational equity.

My Department has begun initial work on a review of the personal tax system, taking account of the recent report of the Commission on Taxation and Welfare, and considering a range of personal taxation issues.