What To Expect From Budget 2023 And How It Might Affect Your Business

What To Expect From Budget 2023 And How It Might Affect Your Business

The Irish Budget for 2023 is set to be announced on Tuesday 27th September during an unprecedented cost of living crisis that shows no sign of ending soon. Taking place two weeks earlier than originally expected, this means some business owners are already scrambling to figure out their response as employers with multiple staff on payroll.

What kind of policies might be put into action in this €6.7 billion package and how will they affect you? Here are some important things to look out for:

Tackling inflation pressure and living costs

This would seem to be the biggest priority for the Irish government based on comments and public expectations as the new budget approaches. In what is set to be his final budget as Finance Minister due to an upcoming cabinet reshuffle in December, Paschal Donohoe has made it his priority to reduce the tax burden on middle class earners by overhauling the existing two-rate income tax system.

He plans to do this by introducing a new third rate of income tax, which would mean significant adjustments may need to be made for business’ existing payroll software presently based on the current structure. This would basically mean the creation of a 30% rate of income tax, returning up to an estimated €1,000 back to the pockets of low and middle earning taxpayers.

Other tax options

Two other options are under consideration when it comes to income tax – full and partial indexation. The former would include adjusting the tax rate bands and tax credits to reflect growing inflation and/or wage growth. This could mean a 3% or 4% increase in income tax. Partial indexation would instead mean increasing tax rate bands by €1500, €2200, and €3000.

When it comes to Corporation Tax, three options are proposed by the Tax Strategy Group (TSG) including a possible increase of the rate to 9% from the current 6.25%. The Knowledge Development Box (KDB) may be extended, allowing the rate to remain consistent at 6.25%, or it may be allowed to cease. Further details are not yet available, but it is worth keeping all options in mind.

Climate action is also considered a high priority by a growing proportion of voters, so this is likely to be considered in this and future budgets. While it may be a sensitive issue amidst a cost-of-living crisis directly related to energy prices, the move away from fossil fuels and towards greener energy is still important for the Irish government.

A five-year plan may be set for proposal that excises the cost of diesel to equalise it with petrol. Directly related to this, the upcoming budget could include €1.48 added to each 60 litre of diesel with €1.28 added to each 60 litre of petrol. VAT is likely to remain untouched in the upcoming budget, though it is worth noting that the aforementioned TSG has suggested that the VAT registration threshold could be raised for small businesses in future.

Remote working relief

Since the pandemic started in 2020, working from home has become more widespread and even necessary in some sectors. While many employers are eager to get workers back to the office, and many workers themselves are eager to return, €3.20 per day has been available for those working from home. This was to help cover the costs of heating, electricity and broadband.

In the midst of a growing cost of living crisis, pushing these costs up further, some have called for this amount to be doubled to €6.40 in the upcoming budget. It remains a possibility despite the increasing number of employees returning to the office and a reopening of the economy as we emerge into what is hoped to be the end of the pandemic.

Doubling of Child Benefit payments and further help

There is potentially more good news for those with children. Anyone receiving Child Benefit Allowance may be set to receive a one-off double payment of €280 for one child (up from the current €140), while those with two children could receive a total of €560 extra in the near future. This could help working families and/or single parents with children in the cost-of-living crisis.

To complement this, working parents may see a cut to childcare costs by up to €200 per month from next year. This is thanks to a proposal by current Children’s Minister Roderic O’Gorman, who is aiming to reduce childcare fees by 50% over the next two budgets.

Tackling childcare costs is reportedly the cabinet’s biggest priority alongside rising inflation and the cost-of-living crisis. As Irish parents are currently paying an average of €800 in childcare per month, it’s easy to understand why the government is aiming to help out parents juggling childcare with long working hours.

Further measures proposed to help with daily rising costs include three separate electricity credit payments of €200 between now and Spring 2023, totalling €600 to be paid to every household in the country.

Payroll complexity and the cost of employment

Naturally with extra tax-related government help for working families, a knock-on effect for company payrolls is to be expected. You may require additional guidance through the upcoming terrain following the budget for 2023 on 27th September.

That’s where Snow Technology come in. We help businesses of all sizes cut costs and increase productivity at the same time; this won’t change regardless of any upcoming budgetary announcements, whether they’re expected or not.

With over 20 years of experience in payroll services and different versions depending on which product suits you best, we can offer comprehensive help to navigate all aspects of taxation and the legal requirements that accompany employment of numerous people. Get in touch today for a quote or if you simply need further advice on how the budget may affect your own business.

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