2 Cut-off points and Tax Credits

Report
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Budget – First week in December
Estimates – lobby groups prior to that
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www.revenue.ie
www.ros.ie
www.welfare.ie
www.employmentrights.ie
www.citizensinformation.ie
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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
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Issued in Dec for new year
Employees responsibility
Contains:
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Employees name, address and PPS no
Tax Credits and Standard Rate Cut-off Point
Tax Rates
Employer registration number
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The Revenue issues a summary to the
employer without details of credits
Separate tax credit issued to each employer
(if more than one employment)
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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
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Standard rate 20%
Higher Rate 41%
Check www.revenue.ie
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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
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€41,800 @20%
one spouse income Balance at 41%
Married couple –
both spouses with
income
€41,800 @20%
Balance at 41%
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Single without children
Earns €38,000
€32,800 @ 20% = €6,560
€5200 @ 41% = €2,132
Total Gross Tax = €8,692
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Single without children
Earns €44,000
€32,800 @ 20% = €
€11,200 @ 41% = €
Total Gross Tax = €
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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.
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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%.
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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
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House Insurance is not allowable as a
tax credit
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Employees
claim tax
credits to
reduce tax
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Eoin: Single
Single Person
PAYE
Total Tax Credit
Monthly (/12)
Weekly (/52)
1650.00
1650.00
3300 annual
275.00
63.46
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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
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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
Monthly
Weekly
Annual
Calculate Tax @ Standard Rate 20%
Calculate Tax @ top rate 41%
Add to give Gross Tax
Subtract Credits (as per Tax Credit Cert)
= Tax due
Pay
Tax @ 20%
Tax @ 41%
Gross Tax
Less Tax Credit
Net Tax Payable
€500 in the week
Pay
Tax @ 20%
Tax @ 41%
Gross Tax
Less Tax Credit
Net Tax Payable
€850 in the week
Pay
Tax @ 20%
Tax @ 41%
Gross Tax
Less Tax Credit
Net Tax Payable
€950 in the week

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