Am I paying too much Tax?

liberal

Hi,

My friend is a Cival Servant here is the break down of pay forthnightly....

He has a Higher Degree and a H Dip

Gross E1580

Deductions

Saving Scheme, Unions etc 70
Tax 367
PRSI 104
Pension 70
Pension Levy 79
Income Levy 32

Net Pay 859

I freaked out when I saw this, he is being fleeced in my opinion, its been going on for years

Thanks for any input!

betonit

liberal wrote: »

Hi,

My friend is a Cival Servant here is the break down of pay forthnightly....

He has a Higher Degree and a H Dip

Gross E1580

Deductions

Saving Scheme, Unions etc 70
Tax 367
PRSI 104
Pension 70
Pension Levy 79
Income Levy 32

Net Pay 859

I freaked out when I saw this, he is being fleeced in my opinion, its been going on for years

Thanks for any input!

Is he married? his wife may have his credits, it does look like he is been taxed on every penny.

mark renton

sure hes paying 70 pension and 70 savings - that aint tax makes up take home to about 1k

Thoie

Income levy and PRSI look about right (give or take a few euros).

The pension levy looks about right - it's the 6.5%, but it comes off the gross, so there's tax relief at 20% built in (by my calcs roughly 102 every two weeks, 20% "discount" = €80).

Without knowing his circumstances the only weird looking one to me is the tax (+ income levy). I worked out they should be coming to roughly €205 for a fortnight, whereas he's paying €399. As betonit says, this could be explained if someone else (like a wife) is using his tax credits. His P60 that he received around April should give him that information.

If that's not the case, then he can request a P21 balancing statement at the end of the year, which will repay him the overpaid tax, and before that he can notify payroll and ask them to investigate.

Edit: if this has been going on for years, and it's wrong, he can get balancing statements going back x years as well - 5 I think.

liberal

Thoie wrote: »

Income levy and PRSI look about right (give or take a few euros).

The pension levy looks about right - it's the 6.5%, but it comes off the gross, so there's tax relief at 20% built in (by my calcs roughly 102 every two weeks, 20% "discount" = €80).

Without knowing his circumstances the only weird looking one to me is the tax (+ income levy). I worked out they should be coming to roughly €205 for a fortnight, whereas he's paying €399. As betonit says, this could be explained if someone else (like a wife) is using his tax credits. His P60 that he received around April should give him that information.

If that's not the case, then he can request a P21 balancing statement at the end of the year, which will repay him the overpaid tax, and before that he can notify payroll and ask them to investigate.

Edit: if this has been going on for years, and it's wrong, he can get balancing statements going back x years as well - 5 I think.

Thanks for that, some very good information

Ok here's the elephant in the closet..... his wife runs a her own company and he is declared as a director of the company

Thoie

liberal wrote: »

Thanks for that, some very good information

Ok here's the elephant in the closet..... his wife runs a her own company and he is declared as a director of the company

That's not an elephant, that's an entire herd

I think, as a director of the company, he has to be paid by her, but that amount could be a nominal sum of a tenner a year, which would have to be declared. It's quite possible that his wife's company is paying him an amount that is eating all his tax credits. They may have done this deliberately to minimise her profits, but if, for example, she's paying him 20k a year that would push him into the higher tax bracket.

Best thing to do is for his wife to bring his PAYE documentation to her accountant, and the accountant will be able to advise the best way to split the credits. There'd be a toss up between paying him for the directorship at a level that keeps his annual income below the threshold, and minimising the tax due on the profit for her company.

I reckon he's currently "losing" €2400 a year from his PAYE, but, using the example figure of 20k, they might saving €8k a year on tax by doing that - net is a €6k gain. Bear in mind I've just pulled those figures out of the air as it's early morning and I've had no coffee yet.

betonit

liberal wrote: »

he is declared as a director of the company

I think he looses the PAYE tax credit? to start with

Ticktactoe

betonit wrote: »

I think he looses the PAYE tax credit? to start with

As a director of the company he is not entitled to the PAYE credit. If his wife owns the company then she too is a director and is not entitled to the paye credit either.

As they are directors their income is assessed under Self assessment and not the paye system therefore he may have his credits offset again the company income (if married and joint assessed or separatley assessed). There is no way to comment on the above figures as all income would have to be taken into account plus there is no way of telling what way their credits are split. In my opinion the above figures are probably correct :rolleyes:

Sand Wedge

He does not lose the PAYE Tax credit. He will get PAYE Tax credit for his Civil Servant PAYE Income.

Ticktactoe

Sand Wedge wrote: »

He does not lose the PAYE Tax credit. He will get PAYE Tax credit for his Civil Servant PAYE Income.

Not when he is listed as a director. Regardless of what paye income he has, he is not entitled to the credit once he is a director of the company.

http://www.revenue.ie/en/tax/it/credits/paye-employee-credit.html#section2

Sand Wedge

As far as i am aware he does not get PAYE Tax credit only on his Proprietory Direction Income. He still gets PAYE Tax Credit on other PAYE Employment as under this employment he is not a proprietory director and would be a Class A employee. Under Proprietory Director Income he will be Class S. I stand to be corrected on this!

Legend100

No Sandwegde, you have it perfectly! it is only proprietary directorships that will restrict the paye credit, other paye employment will be class A and will allow the paye credit to be granted

lotsofthegreen

he should register on www.revenue.ie for PAYE online, once your imput your basic details and get your PIN, he can allocate his tax credits easily, claim all tax credits and once this is done for previous years he'll get a p21 balancing statement/refund automatically. changes for this year will credit in his pay slip

namenotavailablE

If your friend is willing to confirm the following from his payslip we can give an accurate calculation of PAYE etc:

• Tax credits (either per fortnight or for the year)
• Cut-off point (as above, per peiod or per year)

Also, if he can confirm his exact role ie is he a civil servant (working within one of the government departments) or is he a teacher/ Local Authority employee/ health services employee etc. This categorisation determines the amount of pension/ superannuation he pays.
Finally if he could confirm whether he joined the civil service/ public sector either before or after 6 April 1995 (again, this impacts on his superannuation).

Alternatively, download my tax spreadsheet at taxcalc.eu/monthlyss and see what that generates.

FWIW- I calculate that a single teacher with standard tax credits and cut-off values recruited post 6 April 1995 would have the following results (rounded values):

Gross pay                         1580

Superannuation/ pension             70
PS pension levy                     79
PAYE                               152
PRSI/ Health                       104
Income levy                         32
Savings scheme deduction            [U]70[/U]

Net pay                           [U]1073[/U]