Following on from a Government announcement in December to increase the National Minimum Wage by 30c from €9.80 to €10.10 per hour from 1 February 2020, the Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, has today (Friday) confirmed a consequential change to the USC thresholds.
As a result of the decision to increase the National Minimum Wage, a full time worker with 39 hours of paid work per week will earn €394 per week or €20,483 per annum.
The change announced by Minister Donohoe to the USC threshold will see the current ceiling of the 2% rate raised from €19,874 to €20,484.
This will ensure that the 2% rate remains the highest rate of Universal Social Charge (USC) that is charged on the income of full time minimum wage workers.
The amendment will be legislated for later in the year as part of the usual Finance Bill 2020 process and in the interim, Revenue have agreed that this will be implemented on an administrative basis for the 2020 tax year.
Minister Donohoe said:
‘The Government took the decision at the end of 2019 to further increase the National Minimum Wage, in a bid to further support working families, focusing on those in lower incomes. This is the fifth year in a row that the minimum wage has been increased, following the recommendation of the Low Pay Commission. The Government remains committed to ensuring that all work pays well and to reducing excessive tax rates for low and middle income earners.’
The amendment to section 531AN of the Taxes Consolidation Act, 1997 that will be included in Finance Bill 2020 will apply as follows:
TABLE - PART 1
Part of aggregate income
Rate of USC
The first €12,012
The next €8,472
The next €49,560
Deborah Sweeney, Press Adviser to Minister Donohoe – 086 858 6878
Although the purpose of this change is to ensure that minimum wage workers retain the full value of the NMW increase, all individuals with income over €19,874 will benefit from the measure. This is because they will have more income subject to the 2% rate instead of the 4.5% rate.
The value of benefit to each individual depends on their level of income but as the adjustment is modest in scale, the maximum benefit per person is €15.25 per annum or 29c per week.