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How the budget effects your pocket.

Finance Minister Brian Lenihan hit middle and higher-income taxpayers hard in yesterday's Budget.

Mr Lenihan lashed taxpayers by slapping a 1pc levy on all incomes; he stripped €300 a year from the tax relief on mortgage interest (for those who are not first-time buyers); he failed to increase tax credits; and he also cut tax relief on medical expenses.

Furthermore, he hiked third-level registration fees, which will reduce disposable income.

All in all, a heavy burden for middle Ireland to bear for the mistakes of bankers, bad decisions by developers and the fallout from the global credit crisis.

Mr Lenihan's Budget did give some relief by increasing by €1,000 the amount of income for a single person that is taxed at 20pc to €36,400.

For a couple, this amounted to the tax band being widened by €2,000, which means that they will pay 20pc tax on the first €45,400 if they have one income.

If there are two incomes, the couple will pay 20pc on the first €72,800 of tax. Income over that level will be taxed at 41pc, with these changes taking effect from January 1.

However, the 41pc effectively become 48pc for many taxpayers because of yesterday's changes. This is because the marginal (or higher) rate of 41pc is just for starters.

Added to this is the new 1pc "super tax levy", which will be imposed on all incomes up to €100,100.

Then there is the 4pc PRSI levy, which now applies to income up to €52,000 (the first €127 of income per week is exempt).

Additionally, there is a 2pc health levy on the first €100,100 (and 2.5pc over that). So income for a single person of between €36,400 and €52,00 will be taxed at 48pc. Hard For a couple with one income, the first €45,400 of their earnings will be taxed at 20pc, but the rest up to €52,000 will be taxed at 48pc. (PRSI of 4pc only applies to the first €52,000 of income).

Tax partner at KPMG John Bradley said the changes would hit disposable income hard. The VAT change, which will see the higher rate go from 21pc to 21.5pc, and changes to excise duties to alcohol and the travel tax will take money out of people's pockets, Mr Bradley added.

Head of the Irish Taxation Institute,Mark Redmond said the new levies, alongside new taxes, means that everyone will pay more.

Charlie Weston