Income Tax – Learning Outcomes pg 466-480 Income Tax – Learning Outcomes Solve problems about income tax, including PAYE, PRSI, USC, other deductions, and tax credits.

Solve Problems About Income Tax pg 466-480 Solve Problems About Income Tax Gross pay is the money you are paid before deductions. Deductions are subtracted from your gross pay: PAYE – pay as you earn, the main income tax. PRSI – pay related social insurance, contributes to welfare. USC – universal social charge. Also includes union fees, pension contributions, etc. Tax credits allow you to avoid paying a certain amount of tax. Net pay is the money you are paid once deductions are taken into account.

Solve Problems About PAYE pg 466-480 Solve Problems About PAYE PAYE is charged at two rates: You pay 20% tax on your income up to the standard rate cut off (varies per person, about €30 000 – €40 000). You pay 40% tax on any income past the standard rate cut off.

Solve Problems About PAYE pg 466-480 Solve Problems About PAYE e.g. Laura’s gross pay is €45 800 per year. Her standard rate cut- off is €33 800. How much of her income is taxed at 20%? How much of her income is taxed at 40%? What is her total PAYE?

Solve Problems About PRSI pg 466-480 Solve Problems About PRSI PRSI is calculated based on type of work (e.g. office work, service sector, farmers etc.) and the amount earned per week. There are a lot of categories, but most people are in Class A, e.g. A0 – between €38 and €352 per week are exempt. AX – between €352 and €356 per week do not pay PRSI on the first €127, but pay 4% on the balance. AL – earnings between €356 and €500 are pay 4%. A1 – €500 and over pay 4%. A2 – €500 and over pay 4%.

Solve Problems About PRSI pg 466-480 Solve Problems About PRSI Employers also pay PRSI for each of their employees. e.g. Chloe earns €650 per week. She is in class A1, so she pays 0% on the first €127 she earns per week and 4% on the balance. Chloe’s employer also pays 10.75% on all her earnings. How much PRSI does Chloe pay? How much PRSI does Chloe’s employer pay?

Solve Problems About USC pg 466-480 Solve Problems About USC USC works similarly to PAYE and PRI, but everyone has the same cut-offs: 1% of the first €12 012, 3% of the next €6 656, 5.5% of the next €51 376, 8% of the remaining income.

Solve Problems About USC pg 466-480 Solve Problems About USC e.g. Julven earns €50 000 per annum (i.e. per year). Calculate the USC she pays each year.

Solve Problems About Tax Credits pg 466-480 Solve Problems About Tax Credits Each person is allowed to not pay a certain amount of tax based on their circumstances:

Solve Problems About Income Tax pg 466-480 Solve Problems About Income Tax Cathy works in a bakery and earns €8.65 per hour. She works 40 hours a week. Find Cathy’s gross pay for the week. Cathy has to pay income tax at a rate of 20%. Find Cathy’s gross tax. She has a tax credit of €20 per week. Find Cathy’s net tax. Cathy pays €10 into her pension each week. How much per week is she left with?

Solve Problems About Income Tax pg 466-480 Solve Problems About Income Tax Last year Elena had a gross income of €36 960. She had to pay Universal Social Charge (USC) and income tax on her gross income. The rates and bands of USC are as follows: Find the amount of USC that was deducted from Elena’s gross income last year. The standard rate of income tax was 20% and the higher rate was 41%. The standard rate cut-off point was €32 800. Elena paid a total of €4965.60 income tax last year. Find Elena’s tax credits for the year.

Solve Problems About Income Tax pg 466-480 Solve Problems About Income Tax Eleanor has a gross income of €38500 for the year. She has an annual tax credit of €3300. The standard rate cut- off point is €33 800. The standard rate of income tax is 20% and the higher rate is 40%. Eleanor pays union fees of €250 per year. Find Eleanor’s net pay for the year. Eleanor receives a pay rise. As a result, her net income for the year is €34780. Find Eleanor’s new gross income for the year.