Tax, work and pensioners: Up to 160,000 to enjoy tax cuts

Low-income pensioners to get increase

Following the implementation of the previous government’s income tax reduction from 35% to 25%, the 2016 Budget introduces further cuts for some 160,000 people who did not benefit from these cuts.

While confirming that people on a minimum wage will remain tax exempt, single persons earning up to €9,100, couples with a joint declaration not exceeding €12,700 and parents declaring up to €10,500 will be also exempt from tax.

Moreover, single people earning up to €9,500 will benefit from up to €90 in cuts while parents declaring a single income of not more than €21,200 will save up to €105. 

Couples declaring a joint income of up to €28,700 will save up to €120 in tax cuts. Married couples who declare their income separately will jointly save up to €180.

Moreover, married couples who both earn up to €21,000 will enjoy a tax cut of up to €210.

Athletes and coaches enjoy lower tax rate

The income tax reform introduced in the last two budgets for football and water polo players has been extended to all athletes and coaches in all sport disciplines.

They will now enjoy a 7.5% income tax rate while in a drive to encourage sport activity and fight obesity government has decided to cut VAT on gym memberships, football nursery enrolments and other activities from 18% to 7%.

In-work benefit extended to families with one breadwinner

Last year, government introduced in-work benefits for employed parents earning between €10,000 and €20,400 with children below the age of 23. While low-income families and single parents will continue benefitting from a maximum annual grant of €1,200 per child, the scheme has been extended to families in which only one person is in employment and earns between €6,600 and €12,700. Low-income families with only one breadwinner will benefit from a maximum of €150 per child.

Some 3,700 have so far benefitted from the scheme through which single parents are paid a maximum annual grant of €1,200 per child if they earn between €6,600 and €15,000. Families with two breadwinners earn up to €1,000 per child.

Low-income pensioners to get increase

As from January 2016, low-income pensioners will benefit from an increase of up to €9 a week. The reform, which will cost government some €5 million, will see low-income pensioners aged 75 and over will get a €8.92 a week increase while under 75s will get €8 a week. This reform will benefit some 12,000 pensioners and is the first step in government’s plans to have all pensioners earn 60% of the national median income by 2027.

Some 12,000 pensioners will benefit from the reform, which fits within government’s plans to eradicate poverty.

Starting from next year, the lowest pension will stand at €7,280 while married pensioners who will not benefit from this reform will get a €4.15 weekly bonus over and above the COLA increase. As in previous years, people over 75 will receive a grant of €300.

People who decide to remain in employment in the private sector despite reaching pensionable age will receive an increase for every year they stay in work without applying for a pension.

Moreover, Finance Minister Edward Scicluna yesterday announced that government would be introducing other recommendations put forward by the pension reform working group. These include an increase in contributions credited to parents who take temporary breaks to raise children and an increase of qualifying years of National Insurance contributions from 40 to 41.

Scicluna also said that financial institutions would soon be launching third-pillar pensions following the introduction of the regulatory framework earlier this year.

Police to enjoy 15% tax rate for extra duties

Extra duties performed by police officers on a voluntary basis, such as manning football matches or private functions, will be taxed separately at 15%. This was one of Labour’s electoral pledges, however the 2016 Budget makes no mention of the electoral promise to “adequately compensate” overtime which police officers have not been paid for years.