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TAX ADVICE

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Introduction

As an employee you are liable to pay tax on your earnings, under the Pay As You Earn (PAYE) system. This means that your employer calculates Income Tax, Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) due on your earnings and deducts the amount(s) each time a payment of salary is being made to you.

When you commence working in this country for the first time you will need to contact Revenue as soon as possible to get your Tax Credit Certificate (TCC). Your TCC gives you a breakdown of your tax credits and rate bands, for income tax and USC.

What is a Personal Public Service Number (PPS Number)?

A PPS number is your unique identification number for all dealings with the Public Service, including the Department of Social Protection (DSP), the Department of Education, the Health Service Executive, as well as the Revenue Commissioners.

You may already have a PPS number, if you are an Irish National and were:

• born in Ireland after 1971;
• registered for tax in Ireland since 1979;
• in receipt of any income from the DSP;
• participating in the Drugs Refund Scheme.

If you do not hold a PPS number, you must register with the DSP before you apply for your TCC. Leaflet SW100, issued by the DSP, www.welfare.ie, gives further information on how to register for your PPS number.

You should always quote your PPS number when contacting your Revenue or DSP office.

Your PPS number is very important and you should keep a permanent record of it.

What do I pay Income Tax on?

You pay income tax on earnings arising from your employment, including bonuses, overtime and non-cash payments known as Benefits-in-Kind e.g. use of company car, etc. Other income that you receive may also be taxable, e.g. certain payments from the DSP, rental income, foreign income etc. and this income must be declared to Revenue so that your tax credits and rate band can be adjusted accordingly. If your total income in the year is below a certain amount, you may be exempt from paying income tax or if you earn slightly higher than the exemption limit you may be entitled to marginal relief.

How do I apply for my Tax Credit Certificate?

Once you start working you must register with Revenue in order to get your TCC otherwise your employer will deduct emergency tax on your earnings. You need to complete a Form 12A. The completed form should be sent to your Revenue office. To obtain the address of your Revenue office visit www.revenue.ie Contact Details section.

Your employers PAYE registered number must be quoted on the Form 12A. Your employer will give you this number. If you are allocated a personnel number by your employer, it should also be quoted on the Form 12A. The personnel number can also be known as a works, payroll or staff number.

Both you and your employer will then receive notification of your tax credits and rate band.

Once your employer has received this notification, he or she can make the appropriate tax deductions from your salary and make a refund of any excess tax that was deducted.

When do I start paying Income Tax, USC and PRSI on my income?

You will normally start to pay income tax, USC and PRSI from your first payday and will receive a payslip from your employer showing a breakdown of your earnings, tax, USC and PRSI deductions.

The amount of income tax you pay depends on your earnings, your rate band and the amount of your tax credits. If your tax liability is less than your tax credits, you do not pay tax. If your tax liability is more than your tax credits, the tax due is the difference between the two.

• For each pay period, income tax is deducted from your earnings at the standard rate of tax up to a specified amount. Earnings above this amount are taxed at the higher rate.
• USC deductions depend on the USC rates and thresholds that apply to you.
• PRSI contributions are based on your PRSI class.

What are Tax Credits?

Tax credits are credits that you may be entitled to claim depending on your personal circumstances, e.g. a single, married or in a civil partnership tax credit. Tax credits reduce the amount of income tax that you are likely to pay. Tax credits are non-refundable, however, any unused tax credits in a pay week or month are carried forward to subsequent pay period(s) within the tax year.

What is meant by the Cumulative basis of Taxation?

When you receive a cumulative TCC it means that your yearly tax credits and rate band are evenly divided over the 52 weeks of the tax year. This is known as the cumulative basis and it is the most usual basis of tax deduction.

What is a Week-1 basis?

This basis of taxation is also known as the non-cumulative basis. When you receive a TCC on a week-1 basis, your employer must deduct income tax from your salary on a week-to-week basis. Your yearly tax credits and rate band are not backdated to the start of the year and do not accumulate for each pay period. Your employer cannot make any refunds of income tax that may be due, to you until a cumulative TCC is issued.

There are several reasons why a week -1 basis TCC is issued. Mainly it is because Revenue requires further information from you. Your Revenue office will be able to explain why a week-1 basis TCC was issued to you.

What is Emergency basis?

If your employer has not received:

• your PPS number, or
• a notice of your tax credits and rate band for your current employment, or
• a P45 from your previous employer.

income tax on the emergency rates of tax is deducted from your salary.

The rates of emergency tax increase the longer the emergency basis applies, therefore it is important to make contact with Revenue promptly in order to get your tax affairs up to date.

Once your employer receives a notice of your tax credits and rate band, the emergency basis will cease to apply. Your employer will then make a refund of any excess income tax /USC deducted, to you, when a cumulative certificate is issued. However, if you do not receive your cumulative TCC before the end of the tax year, you must apply for any refund that may be due, to your Revenue office, by submitting your Form P60 to your Revenue office.

Alternatively register for myAccount. Once registered, select PAYE Anytime, input your earnings and tax deducted as shown on your Form P60 and request a review of your income tax liability.

Universal Social Charge (USC)

USC is a tax payable on your gross income, including notional pay (i.e. Benefit-in-Kind) from your employer. It is calculated before your pension contribution deductions. There are different USC rates that apply depending on the amount of your income. If your income is below a specific threshold you will be exempt from paying USC. Payments made to you by the DSP and income already subject to Deposit Interest Retention Tax (DIRT) are also exempt.

Further information and Frequently Asked Questions on USC.

Pay Related Social Insurance (PRSI)

PRSI may be deducted from your salary if you earn over a certain amount. Your PRSI contributions may entitle you to claim Social Protection payments at a future date. For further information on PRSI, contact the DSP at www.welfare.ie.

P45

A P45 is a certificate given to you by your employer when you cease employment. It gives a breakdown of your earnings, income tax, USC and PRSI deducted for the year up to the date you ceased employment.

A P45 is required when:

• commencing a new employment – the P45 should be submitted to your new   employer when you start working, otherwise emergency tax and USC will be deducted;
• claiming a refund of income tax while unemployed – forward your P45 along with a Form P50 – First Claim for Repayment During Unemployment to your Revenue office
• applying for payments from the DSP, such as Jobseekers Allowance/Benefit.

P60

A P60 is a certificate, given to you by your employer, at the end of the tax year. It shows details of your earnings and deductions for the full tax year up 31 December. If you are not working on 31 December you do not receive a P60 as you would have received a P45 when you ceased employment.

PAYE Balancing Statement

This is also known as a P21. It is a statement of your total income from all sources and gives a breakdown of your tax credits, income tax and USC paid during the tax year. You may request a P21 if you want your tax liability reviewed as:

• you have overpaid income tax and/or USC during the year (i.e. you were not granted the correct tax credits during the year or you were on the emergency basis or a week-one basis);
• you wish to claim additional tax credits (e.g. Health expenses);
• you are required to submit the Statement to a Financial Institution or Local Authority in support of an application for a loan or grant.

PAYE Anytime

PAYE Anytime is Revenue’s online service for employees that allows you to conduct business with Revenue electronically 365 days a year. It is the quickest and easiest way to keep your tax affairs up to date. Once you have registered for PAYE and receive your TCC you should then register for myAccount.

For further information, see PAYE Anytime FAQ’s.

Time Limit for Repayment Claims

A claim for repayment of tax must be made within four years after the end of the tax year to which the claim relates.

Please note that rates charged for the use of 1890 (LoCall) numbers may vary among different service providers. If you are calling from outside the Republic of Ireland, phone + 353 1 702 3011.

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CONTACT US

BSS Building Staff Solutions Ltd.,

Merchant’s House,

Merchant Quay,

Dublin 8.

+353 (0)1 7071012

info@buildstaff.ie

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