2 Cut-off points and Tax Credits

1. 2 Cut-off points and Tax Credits

2. Tax changes • Budget – First week in December • Estimates – lobby groups prior to that

3. Current Information • www.revenue.ie • www.ros.ie • www.welfare.ie • www.employmentrights.ie • www.citizensinformation.ie

4. Form 12A • 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

5. Tax Credit Certificate • 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

6. Certificate Summary • The Revenue issues a summary to the employer without details of credits • Separate tax credit issued to each employer (if more than one employment)

8. Duration • 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

9. Tax Rates • Standard rate 20% • Higher Rate 41% • Check www.revenue.ie

10. Tax Bands • 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

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

12. Example: Teresa • Single without children • Earns €44,000 • €32,800 @ 20% = € • €11,200 @ 41% = € • Total Gross Tax = €

13. Bands and Cut-off • 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.

14. 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

15. Standard Rate Cut-Off Point • 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%.

16. Tax Credits 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

17. Personal Tax Credits • Employees claim tax credits to reduce tax

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

19. 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

20. 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

21. Calculating TAX Calculate Tax @ Standard Rate 20% Calculate Tax @ top rate 41% Add to give Gross Tax Subtract Credits (as per Tax Credit Cert) = Tax due

23. Calculating Tax

26. Calculating Tax