Bray People - - NEWS -

MOST peo­ple have trou­ble try­ing to un­der­stand the de­duc­tions from their gross pay. De­duc­tions are made us­ing a com­puter pro­gramme and it is of­ten dif­fi­cult to query the fig­ures. When you do, then peo­ple tend to blame the com­puter rather than ac­cept the re­spon­si­bil­ity for what may well be per­sonal in­com­pe­tence. A com­puter is only as good as the data fed into it.

Ba­si­cally, there should be three sep­a­rate de­duc­tions from gross pay:

In­come Tax is de­ducted at ei­ther 20 per cent and 40 per cent or just 20 per cent alone, de­pend­ing on the in­come earned for the pe­riod. The amount of in­come tax is com­puted by ref­er­ence to the Cer­tifi­cate of Tax Cred­its is­sued by Rev­enue to the em­ployer. Tech­ni­cally, this cer­tifi­cate is re­ferred to by Rev­enue as Form P2C and is up­dated each De­cem­ber for the fol­low­ing year.

Uni­ver­sal So­cial Charge is de­ducted on the first €231 of earn­ings each week at 0.5 per cent and on the next €130 of earn­ings each week at 2.5 per cent. Above that level of earn­ings the USC rate of five per cent ap­plies. Many peo­ple who are ex­empt from In­come Tax due to low earn­ings are still caught for USC. If your to­tal in­come is less than €13,000 per an­num then you should not be pay­ing USC. In­come from the Depart­ment of So­cial Pro­tec­tion, such as the State pen­sion, is not li­able to USC.

PRSI is de­ducted from wages and salaries, usu­ally at Class A rate of four per cent. If you are aged 66 or over then the Class J rate of 0.5 per cent ap­plies. Your en­ti­tle­ment based on pay­ing the Class A rate is pri­mar­ily Unem­ploy­ment Ben­e­fit and the Con­trib­u­tory State Pen­sion. You are also en­ti­tled to free treat­ment in the public ward of a hos­pi­tal funded by the HSE. A lit­tle-known other ben­e­fit is that you are en­ti­tled to go to an­other EU State and get treat­ment in a hos­pi­tal there for which the Ir­ish HSE will have to pick up the tab.

In many small busi­ness op­er­a­tions the em­ployer may agree a net pay rate with an em­ployee. In this sit­u­a­tion the em­ployer agrees to pick up the bill for what­ever tax, USC and PRSI that must be de­ducted from the em­ployee.

This can work to an em­ployee’s ad­van­tage. Sup­pose the spouse works for the State or for a large pri­vate firm then the em­ployee who gets a net pay rate in a small busi­ness can trans­fer all their cred­its to the other spouse with a big em­ployer. Thus, the small busi­ness may find it very ex­pen­sive to pick up the de­duc­tions when all the tax cred­its are gone to the other spouse.

With a large em­ployer, there may be de­duc­tions from pay­roll for pen­sion con­tri­bu­tions, hol­i­day fund and med­i­cal in­surance group schemes. Here, only the pen­sion con­tri­bu­tion may be rel­e­vant when cal­cu­lat­ing de­duc­tions from gross pay.

A per­son who be­lieves their tax de­duc­tions are wrong should first take it up with the em­ployer and, if not sat­is­fied, then they should con­tact the Rev­enue quot­ing their PPS num­ber and their em­ployer’s PAYE Reg­is­tra­tion num­ber.

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