Tax in Ireland

LoBo

Anyone care to explain to me the basics of PAYE & PRSI from the point of view of an employee? In particular i'd like the 'tax credit' system explained vs the old tax free allowance.

My particular case is that this tax year i've only worked from June onwards - how does this affect my PAYE tax credits? I work for a small startup so none of us actually knows how to work it out yet , so so far i've been paid my full gross monthly wage each month - this month I hope to get paid minus all previous months tax. Anyone able to clear it up for me? If necessary I can provide actual figure for salary.

Hellrazer

The easiest way of explaining Tax credits is this.

1.The revenue commisioners gives you certain tax credits(Basically an amount of €) for certain criteria ie marriage,age,earings,tax bracket etc.
2.This is then calculated over a 12 month period so say your total tax credits is €1200 (For handiness )the your monthly tax credit is €100 and you weekly is €25.
3.Now say your earnings are €400 per week and your tax rate is 20%-what happens is your total wages are taxed at 20% ie €80 and your tax credit is then"credited" against your tax liability which basically means that your tax per week is €80 minus your €25 tax credit equals €55.So if you werent paying any prsi then your take home pay would be €345.

Hope this helps you out-Ive explained it as simple as I can.
Prsi is a different
On the first €127 of your wages you pay 2% and the balance at 6% which is straight forward enough to work out.

Richie

LoBo

Yep, that's exactly how I thought it works. There is still the question of how it works when you aren't working for the full tax year. In my case I started in June (just graduated). Do I have 6 months backlog of (as in your example) the €25/week credit? Do I claim back what's owed at end of year?

Hellrazer

If you start work halfway through the tax year you still pay the same amount of tax ie 6months of your €1200 = €600
Like

LoBo

ok thanks for the info + prompt replies. Side note, with the old tax free allowance system this wasn't the case was it? If say you only worked 3 months a year you got quite a lot tax free? (I've never had to worry about tax before cos I used work for a big company that just handed me a payslip )

Sposs

[URL=http://]www.payrollireland.com:[/URL]

You should try these guys,i also work in a start up company where none of us had a clue about wages,these guys looks after all that and are fairly cheap.

LoBo

from [url]www.payrollireland.com:[/url]

Cumulative System

The new system will operate on a cumulative basis for both tax credits and standard rate cut-off points. This means that tax credits and/or standard rate cut-off point which are not used in a pay period are carried forward and are available for use in the calculation of tax due in the following pay period within the tax year.

Example
Where the gross tax on gross pay in a pay period is, say, £100 and the tax credit is £120, the difference of £20 is not refunded. The employee simply has no tax liability for that period. The unused tax credit of £20 is carried forward for offset against tax due in the subsequent pay period(s).

thanks for the link sposs. So then I have 6 months of built up tax credits right? So likely I will have fairly little tax to pay on these 4 months?

Though I do notice that the site is obviously out of date by a year - no reference to € anywhere. Anyone know if its changed since then?