1. Income Tax
Derek has a gross annual income of €50,000. His standard rate cut-off point is €32,000. The standard rate of tax is 20%. The higher rate is 40%. His tax credit is €3,500. Derek is in Class A1 for PRSI. Assuming a 52-week year, calculate Derek’s:
(a) Gross tax
(b) Tax payable (c) Net income (ignoring PRSI)
(d) PRSI payment
(e) Net income after PRSI has been paid
(f) Weekly net income if he pays health insurance of €624 per annum
(a) Gross tax = Standard tax + Higher tax
Standard tax = Standard rate cut-off point × Standard rate
= €32,000 × = €6,400
Higher tax = Income above standard rate cut-off point × Higher rate
= €50,000 − €32,000 = €18,000
Higher tax = €18,000 × = €7,200
Gross tax = Standard tax + Higher tax
= €6,400 + €7,200 = €13,600
∴ The gross tax is €13,600.

2. Income Tax (b) Tax payable = Gross tax − Tax credit
= €13,600 − €3,500 = €10,100
∴ The tax payable is €10,100.
(c) Net income = Gross income − Tax payable
= €50,000 − €10,100 = €39,900
∴ Derek’s net income is €39,900.
(d) PRSI payment = €50,000 × 0.04 = €2,000
∴ The PRSI payment is €2,000.
(e) Net income − PRSI = €39,900 − €2,000 = €37,900
∴ The net income after PRSI is paid is €37,900
(f) Net income − Insurance =
€37,900 − €624 = €37,276
∴ Derek’s weekly net income €37,276 ÷ 52 = €716.85