It\u2019s not going to be the best of starts to the new year.<\/p>\n
Normally, your first pay cheque of the new year brings some welcome savings, as that\u2019s when budget day measures typically kick in. Not in 2026, however, as a lean budget day<\/a> means savings are few and far between this January.<\/p>\n This year, it will be mostly down to your own financial nous and good resolutions to manage your household budget, but there are still some ways you can save. <\/p>\n 1. Less tax on investments<\/p>\n It\u2019s not quite what most would have hoped for, but the announcement in October\u2019s budget that exit tax will fall by three percentage points, from 41 per cent to 38 per cent, will be of benefit.<\/p>\n Exit tax applies to gains made on domestic life assurance policies, certain foreign life assurance policies and Irish-domiciled investment funds as well as funds in certain countries with which Ireland has a double taxation agreement, including exchange-traded funds (ETFs). <\/p>\n At 38 per cent, it still remains significantly higher than either capital gains tax or Dirt, both of which are levied at a rate of 33 per cent. <\/p>\n If you have a fund tracking the S&P 500, over the past five years, you may have made gains of about 88 per cent. Based on a \u20ac100,000 initial investment, cashing this in now will result in a tax bill of \u20ac33,440.<\/p>\n If you had cashed the policy in in December, based on the same values, your tax bill would have been \u20ac36,080 \u2013 or \u20ac2,640 more.<\/p>\n So if you\u2019re thinking of cashing in an investment<\/a> policy, should you wait for a potential further fall? Minister for Finance Simon Harris has indicated that a review of tax for retail investment will be on the agenda early this year. <\/p>\n 2. More tax relief for your pension<\/p>\n It\u2019s not for everyone \u2013 or even that many people. But, if you have a big pension<\/a> fund then you will benefit from the increase in the standard fund threshold (SFT) this January.<\/p>\n First announced in 2024, the increase came about after claims that top jobs in the public sector couldn\u2019t be filled due to penal taxes on pensions. <\/p>\n The SFT represents the maximum size your pension fund can be before additional taxes kick in. <\/p>\n Unchanged since 2014, it previously stood at \u20ac2 million \u2013 which meant that anything you saved above that would be subject to a 40 per cent chargeable excess tax (CET). <\/p>\n While the CET will remain at 40 per cent, the SFT will rise by \u20ac200,000 this January and by the same amount in the years to 2029, which means that it will be \u20ac2.8 million by then. <\/p>\n This will offer greater flexibility \u2013 and lower taxes \u2013 for those who are fortunate enough to be able to max out their pensions. <\/p>\n 3. Pension contributions from your employer <\/p>\n Whether you\u2019re in an occupational scheme or the State\u2019s new My Future Fund<\/a>, January may be the first time either you, or your employer, have contributed to your pension fund. <\/p>\n My Future Fund has been decades in the making, but Ireland\u2019s auto-enrolment scheme will finally get under way this month. About 800,000 employees are expected to benefit from the pension fund, which will see them receive a total contribution of 3.5 per cent in the first three years (1.5 per cent from employee, 1.5 per cent from employer, and 0.5 per cent from Government). <\/p>\n Amid fears that employers were trying to avoid these minimum contribution rates \u2013 particularly given that the rates will increase to 6 per cent within 10 years \u2013 other employees, who won\u2019t join My Future Fund, will still benefit. <\/p>\n From this month, employers who operate occupational schemes \u2013 and previously didn\u2019t have to contribute \u2013 will have to ensure that all members of their scheme have their pension funded to the tune of 3.5 per cent. <\/p>\n At least 1.5 per cent of this must come from the employer (in line with My Future Fund). <\/p>\n The combined move means that an employee earning \u20ac35,000, who previously had no private pension savings, will now get \u20ac1,225 a year \u2013 and at least \u20ac700 of this will be from their employer\/Government. <\/p>\n [\u00a0If you earn more than \u20ac20,000 you will now have to pay into a pension schemeOpens in new window<\/a>\u00a0]<\/p>\n 4. Landlord relief<\/p>\n If you are a landlord<\/a> with a buy-to-let property, your tax returns in October\/November of this year will come with a welcome reduction. <\/p>\n First announced in 2023, the Residential Premises Rental Income Relief (RPRIR) is aimed at keeping smaller landlords in the rental market. <\/p>\n The relief is offered at a rate of 20 per cent of the landlord\u2019s rental income, and, for 2025 tax returns, the limit will increase from \u20ac3,000 to \u20ac4,000. Not only that, but as the limit will increase to \u20ac5,000 for the 2026 tax year, you can also get a reduction on your provisional tax for that year. <\/p>\n So, this means that the tax you will save on will increase from \u20ac600 for 2024 to \u20ac800 in 2025 \u2013 and \u20ac1,000 for 2026. <\/p>\n 5. Increase in state pension and other welfare payments<\/p>\n One positive budget decision was the move to increase welfare payments. It means that this month those getting the top-rate State pension will get an increase of \u20ac10 to \u20ac299.30 a week.<\/p>\n And there will be a similar increase to most weekly welfare payments, while income limits have also become more generous. The weekly carer\u2019s allowance income disregard, for example, will increase from \u20ac625 to \u20ac1,000 for a single person and to \u20ac2,000 for a couple.<\/p>\n Fuel allowance will also increase, by \u20ac5, to \u20ac38 a week while domiciliary care allowance will go up, by \u20ac20, to \u20ac380 a month. <\/p>\n Two ways you will lose money1. Increase in PRSI<\/p>\n You\u2019ll already have seen an increase of some 0.1 per cent in your PRSI<\/a> bill last October. And you can expect another one \u2013 at a higher rate of 0.15 per cent \u2013 once more in October. <\/p>\n The increase in PRSI is part of the Government\u2019s long-term pension funding strategy. <\/p>\n It may be minimal on an annual basis \u2013 someone earning \u20ac60,000, for example, will pay an extra \u20ac68 in PRSI this year, according to PwC figures \u2013 but it does mean that class A rates will have increased from 4 per cent in September 2024 to 4.35 per cent by October 2026. <\/p>\n 2. No indexation means more taxation<\/p>\n The biggest way you\u2019re going to lose money, however, goes back to October\u2019s budget. While no income tax<\/a> increases were announced, the decision not to adjust the bands for inflation means that many of us will actually lose money this year.<\/p>\n And, if you\u2019re due a pay rise, and your income is around the standard rate band (\u20ac44,000), then a lot of the increase will be eaten up by higher-rate tax of 40 per cent. <\/p>\n