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

2. 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. Often just called “tax”.
PRSI – pay related social insurance, contributes to welfare.
USC – universal social charge, another tax.
Also includes union fees, pension contributions, etc.
Tax credits allow you to avoid paying a certain amount of tax.
Net pay (a.k.a. take home pay) is the money you are paid once deductions are taken into account.

3. Solve Problems about PAYE
PAYE is charged at two rates:
You pay 20% on your income up to the standard rate cut-off (varies per person, about € € depending on circumstance).
You pay 40% on any income beyond the standard rate cut-off.

4. Solve Problems about PAYE
e.g. Annie’s gross pay is € per year. Her standard rate cut-off is €
How much of her income is taxed at 20%?
How much of her income is taxed at 40%?
What is her total PAYE (gross tax)?
e.g. Jake’s gross pay is € per year. Being a widower, and the sole remaining parent of Cian and Kate, his standard rate cut-off is €
What is his gross tax?
What is his take-home pay?

5. 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%.

6. Solve Problems About USC
USC works similarly to PAYE and PRSI, but everyone has the same cut-offs:
0.5% of the first €12 012,
2% of the next €7 360,
4.75% of the next €50 672,
8% of the remaining income.

7. Solve Problems About Tax Credits
Each person is allowed to not pay a certain amount of tax based on their circumstances:

8. Solve Problems about Deductions
Some people have other deductions from their pay.
Either individuals or companies may organise for pension fees, union fees, health insurance etc to be paid directly from income.
e.g. Lyn’s gross tax is €80 per week. She pays €2 union fees and €10 health insurance per week. Her tax credits are €45 per week. What is Lyn’s total deduction per week?

9. Solve Problems about Income Tax
2012 OL P1 Q1
Alan pays income tax, a universal social charge (USC) and pay-related social insurance (PRSI) on his gross wages. His gross weekly wages are €510.
Alan pays income tax at the rate of 20%. He has weekly tax credits of €63. How much income tax does he pay?
Alan pays the USC at the rate of 2% on the first €193, 4% on the next €115 and 7% on the balance. Calculate the amount of USC Alan pays.
Alan also pays PRSI. His total weekly deductions amount to € How much PRSI does Alan pay?

10. Solve Problems about Income Tax
2004 OL P1 Q1
The standard rate of income tax is 20% and the higher rate is 42%. Orla has a gross income of € for the year and a standard-rate cut-off point of€
Calculate the amount of tax due at the standard rate.
Calculate the total amount of gross tax due.
Orla has tax credits of €3400 for the year. After tax is paid, what is Orla’s income for the year?

11. Solve Problems about Income Tax
2016 OL P1 Q6
Fiona earns a gross wage of €1550 every fortnight. She pays income tax, a Universal Social Charge (USC), and Pay Related Social Insurance (PRSI) on this wage.
Each fortnight, Fiona pays income tax of 20% on the first €1300 she earns and 40% on the remainder. She has tax credits of €126 per fortnight. Find how much income tax she pays per fortnight.
Each fortnight, Fiona also pays USC on her gross wage. The rates are: 1% on the first €462 she earns, 3% on the next €214, and 5.5% on the balance. Find the total amount of USC she pays each fortnight.

12. Solve Problems about Income Tax
2016 OL P1 Q6
Fiona earns a gross wage of €1550 every fortnight. She pays income tax, a Universal Social Charge (USC), and Pay Related Social Insurance (PRSI) on this wage.
Fiona pays PRSI amounting to €18 each fortnight. Find the sum of her fortnightly deductions.
Write the sum of her fortnightly deductions as a percentage of her gross wage. Give your answer correct to one decimal place.