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Budget of doom

  • 25-03-2009 12:26pm
    #1
    davemie
    Registered Users, Registered Users 2 Posts: 99 ✭✭


    Regarding the budget of doom coming this April. When will the Tax (PAYE, PRSI etc) increases come into effect? I'm assuming it will be immediately or the start of May! Regardless, I'm a little confused as to how a Tax increase would be applied to self employee's people.

    Normally tax changes take place at the start of the year. Personal Tax returns also take place from the start of the year to the end of the year. So its quite easy to work out what someone's tax should be as it's one tax rate for the full year.

    However, if tax changes do not take place at the start of the year, how will we work out personal tax returns? Will we calculate our tax for Jan, Feb, Mar using the old system and the remainder of the year using the new system?

    If this is the case, say I normally pay myself 1200 euro over the full year (100 euro per month), what's to stop me changing my salary and paying myself 1000 euro for the first three months (on the old tax system), and then reduce my salary to 200 euro for the full remaining 9 months. I still pay myself the same amount of money over the full year, but would I get away with paying the vast majority of my salary during the time the lower tax system is in place?


Comments

  • #2
    Kinetic^
    Closed Accounts Posts: 13,249 ✭✭✭✭Kinetic^


    They'll more then likely introduce some rules to accompany the new taxes. If you run a ltd company then you can pay yourself however you like. If you're a sole trader then your income tax return is based on your accounts (not going to get into cessation rules etc although they could apply) for that year so would not have as much flexibility as someone running a ltd company. They apportion it out depending on how many months you were working in the lower/higher bracket but again,not as flexible as a ltd company.


  • #3
    jnh
    Registered Users, Registered Users 2 Posts: 31 ✭jnh


    the most likely scenario would be that for a sole trader profits would be apportioned between the two periods. for employees the tax would be charged when the salary has been received. i have advised some clients (company directors) to pay a lump sum prior to the budget date to avail of the lower tax rate. bear in mind that PAYE/PRSI on this would be due on the March p30. the only other issue is cashflow ie. can you afford to pay yourself 9 months salary up front.


  • #4
    davemie
    Registered Users, Registered Users 2 Posts: 99 ✭✭davemie


    jnh wrote: »
    the only other issue is cashflow ie. can you afford to pay yourself 9 months salary up front.

    Obliviously this wouldn't be possible for most without putting the company into the red. How about paying PAYE & PRSI as required, and also paying the director's salary, however the director injects the money back into the company as a director loan?

    You could also pay a smaller amount!


  • #5
    zoey48
    Registered Users, Registered Users 2 Posts: 50 ✭✭zoey48


    I have advised some clients (company directors) to pay a lump sum prior to the budget date to avail of the lower tax rate. bear in mind that PAYE/PRSI on this would be due on the March p30. the only other issue is cashflow ie.


    Why is cashflow an issue can you just not get an overdraft and pay yourself whatever you like as long as you can cover the loan over the rest of the year you should have no problems?


  • #6
    jnh
    Registered Users, Registered Users 2 Posts: 31 ✭jnh


    an overdraft would be a result of a cash flow problem. good luck getting the overdraft


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  • #7
    Bren1609
    Closed Accounts Posts: 459 ✭✭Bren1609


    zoey48 wrote: »
    Why is cashflow an issue can you just not get an overdraft and pay yourself whatever you like as long as you can cover the loan over the rest of the year you should have no problems?

    How would you repay the loan? Also, there's anti avoidance provisions in relation to directors loans.


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