How will the 2023 budget affect employees’ paychecks?

On the 27th of September 2022, Minister for Finance, Paschal Donohoe, and Minister for Public Expenditure and Reform, Michael McGrath, announced the budget for 2023.  

The government outlined planned measures to help ease the cost-of-living crisis, and to help employees retain more of their earnings. Below, we’ve listed the changes which will affect employees’ paychecks. 

Minimum wage increase 

On the 14th of September 2022, the Government announced that the National Minimum Wage will increase by 80c to €11.30 per hour from the 1st of January 2023.  

Income tax standard rate cut-off 

From January 2023, there will be an increase of €3,200 to the income tax standard rate (20%) tax band. This means that employees can now earn up to €40,000 for single individuals or up to €49,000 for married couples on one income, before they are taxed at the higher rate of 40%. 

Tax credits increase 

Personal, employee and earned income tax credits will increase by €75, from €1,700 to €1,775, for 2023. 

2% USC band increase 

In line with the increase to the National Minimum Wage, there will be an increase of €1,625 to the 2% USC band, taking it from €21,295 to €22,920. 

USC rates 

The rate of USC for medical card holders and those aged over 70 and earning €60,000 or less a year, will remain capped at 2% for 2023. 

Rewarding employees 

Employers can now reward their staff with non-cash benefits without the payment of tax, PRSI and USC, up to the amount of €1,000 per tax year. This amount was previously set at €500. This change applies in the current tax year. 

Support for families on low incomes 

The Working Family Payment is a weekly, tax-free payment available to employees with children, and whose family income is under a certain amount. In January 2023, the Working Family Payment thresholds will increase by €40 per week across all family sizes, meaning more families will become eligible for the payment. Those who are in receipt of the Working Family Payment will also get a cost-of-living lump sum payment of €500 from November 2022. 

Paid leave for parents 

Employees who are receiving maternity, paternity, adoptive or parent’s benefit will see an increase of €12 per week, which will come into effect from the 1st of January 2023. 

Remote working supports  

Employees working from home will continue to be able to claim 30% tax relief on expenses such as heat, light, electricity, telephone and broadband. 

If you wish to find out more about the budget for 2023, click here.