2 Cut-off points and Tax Credits

2 Cut-off points and Tax Credits

Budget – First week in December Estimates – lobby groups prior to that

Tax changes

www.revenue.ie www.ros.ie www.welfare.ie www.employmentrights.ie www.citizensinformation.ie

Current Information

First time employment Employee must apply for a tax credit

certificate Form 12A Emergency tax will apply until the cert is

received by the employer

Form 12A

Issued in Dec for new year Employees responsibility Contains:

◦ Employees name, address and PPS no◦ Tax Credits and Standard Rate Cut-off Point◦ Tax Rates◦ Employer registration number

Tax Credit Certificate

The Revenue issues a summary to the employer without details of credits

Separate tax credit issued to each employer (if more than one employment)

Certificate Summary

For the year.....indicates when it is valid for Continue to use until an amended one is

issued◦ Employee supplies new information to the tax

office◦ Budget changes

Duration

Standard rate 20% Higher Rate 41% Check www.revenue.ie

Tax Rates

A tax band is a fixed amount of taxable income that is taxed at the standard rate

Any taxable pay exceeding the band amount is taxed at the higher rate

Tax Bands

Personal Status Bands of Taxable Income in a Sample Tax Year

Single/Widowed without dependant children

€32,800 @20%Balance @ 41%

Single/Widowed with dependant children

€36,800 @20%Balance @ 41%

Married Couple-one spouse income

€41,800 @20%Balance at 41%

Married couple – both spouses with income

€41,800 @20%Balance at 41%

Single without children Earns €38,000 €32,800 @ 20% = €6,560 €5200 @ 41% = €2,132 Total Gross Tax = €8,692

Example: Mike

Single without children Earns €44,000 €32,800 @ 20% = € €11,200 @ 41% = € Total Gross Tax = €

Example: Teresa

The Standard Rate Cut-off Point is the same as the Band but the amount may be adjusted for any non-PAYE income or allowable expenses. This will be shown in the Tax Credit Certificate

The Cut-off varies from person to person.

Bands and Cut-off

What is Standard Rate Cut-off Point? A standard rate cut-off point is the amount of

your personal standard rate tax band 20%. For each pay period, weekly, fortnightly or monthly, you pay tax at the standard rate of tax up to your standard rate cut-off point. Any income over your standard rate cut-off point is taxed at the higher rate 41%.

Your own personal amounts are printed on your most up-to-date Tax Credit Certificate – notified by revenue to your employer

For each pay period, weekly, fortnightly or monthly, you pay tax at the standard rate of tax up to your standard rate cut-off point. Any income over your standard rate cut-off point is taxed at the higher rate 41%.

Example: Ann has a weekly standard rate cut-off point of

€680.77 and she earns €750 per week. This means that the first €680.77 of Ann's wages is taxed at 20% and the balance €69.23 (€750 - €680.77) is taxed at the higher rate 41%.

Standard Rate Cut-Off Point

All employees are automatically entitled to the following tax credits: Personal PAYE Flat Rate Expenses – related to the nature of

employment, usually agreed between union and Revenue and are allowed at the standard rate of tax◦ Chef €97 Flat Rate Expense Credit @20 % = 19.40◦ Carpenter Flat Rate Expense Credit @20% = 44.00

House Insurance is not allowable as a tax credit

Tax Credits

Employees claim tax credits to reduce tax

Personal Tax Credits

Eoin: Single Single Person 1650.00 PAYE 1650.00 Total Tax Credit 3300 annual Monthly (/12) 275.00 Weekly (/52) 63.46

Calculating Tax Credits

Anne: widow with 2 children (6&9) Widowed person 1650 One Parent Family 1650 Widowed Parent 3150 PAYE 1650 Total Tax Credit Annual Monthly Weekly

Brian & Anne: married with 1 child (7) special needs. Elderly mother lives with them. Both work outside the home.

Married person 3300 PAYE 3300 Incapacitated child 3300 Dependant Relative 70 Total Tax Credit Annual Monthly Weekly

Calculate Tax @ Standard Rate 20%Calculate Tax @ top rate 41%Add to give Gross TaxSubtract Credits (as per Tax Credit Cert)= Tax due

Calculating TAX

Calculating Tax

Pay €500 in the weekTax @ 20%Tax @ 41%Gross TaxLess Tax CreditNet Tax Payable

Calculating Tax

Pay €850 in the weekTax @ 20%Tax @ 41%Gross TaxLess Tax CreditNet Tax Payable

Pay €950 in the weekTax @ 20%Tax @ 41%Gross TaxLess Tax CreditNet Tax Payable