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Reduced Tax Credits on Maternity Benefit (paying more tax vs before)

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  • 17-07-2017 4:09pm
    #1
    greep
    Registered Users Posts: 101 ✭✭


    Could somebody please explain why a person going on Maternity Benefit (MB) would have her Tax Credits & the overall payment reduced versus the previous period (while in employment).

    I thought that when you earn more, you pay more taxes, but it seems the other way round in this case, i.e.:
    Weekly MB payment is €65 less than weekly wages, and yet the person pays more tax versus before (during employment).

    Weekly Maternity Benefit payment €235 (net)
    Weekly Wages €300 (net)

    Personal Tax Credit 1650
    Employee Tax Credi 1650

    An updated Tax Certificate states:
    "Tax Credits Reduced By" Maternity Benefit: €794 (July - Dec 2017)"

    Is there any reasonable explanation for this?
    Tagged:


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    #2
    scheister
    Registered Users Posts: 1,309 ✭✭✭scheister


    Maternity benefit is taxable. But since not all people will get paid while on maternity they cannot get your employer to collect the tax. So they reduced your tax credits and bands to account for the tax on the benefit. So as a result your take home pay will be less since your credits are now lower.


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    #3
    greep
    Registered Users Posts: 101 ✭✭greep


    scheister wrote: »
    Maternity benefit is taxable. But since not all people will get paid while on maternity they cannot get your employer to collect the tax. So they reduced your tax credits and bands to account for the tax on the benefit. So as a result your take home pay will be less since your credits are now lower.

    Thanks, so basically the person is no longer getting EMPLOYEE TAX CREDIT (€1650), only PERSONAL TAX CREDIT (so half of what she used to get when in employment), correct?
    I thought that could be the reason, but Revenue tried explaining something different, which I didn't get... :-/


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    #4
    scheister
    Registered Users Posts: 1,309 ✭✭✭scheister


    the ways it done can be strange.

    If you are not working while on maternity benefit you would be entitled to it but its taken away again to cover the tax. Might work better in an example

    Assuming you get a benefit of €230 a week for 26 week is 5980. So you will be entitled to a PAYE credit of €1,196 as to get full 1650 you need to earn 8,250.

    so you get a total tax credit of 1,650+1,196=2,846 which is personal+ paye from above. they then reduce it by the the credit on the benefit so goes back to 1650.

    This means rather then taxing you 20% on the benefit. your other income or husbands income will increase by this tax so it is still collected.


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