Is this right? (tax calculation)

1der

On this site they have a tax calculator: link

According to the calcuator, you get less net pay if you earn E27000, than if you earn E26000!!???
Is that right?

Gross Pay: 27000.0
Pension & Ded: 0.0
Income Levy: 540.0
PRSI & Health: 1895.52
Net Tax Due 1740.0
Net Pay: 22824.48



Gross Pay: 26000.0
Pension & Ded: 0.0
Income Levy: 520.0
PRSI & Health: 775.52
Net Tax Due 1540.0
Net Pay: 23164.48


and almost as much for E25000!!!

Gross Pay: 25000.0
Pension & Ded: 0.0
Income Levy: 500.0
PRSI & Health: 735.52
Net Tax Due 1340.0
Net Pay: 22424.48

namenotavailablE

Yes- believe it or not, the figures are correct.

This happens because once your annual earnings (calculated after deducting pension and income protection payments if you are paying these) are above €26000 you are liable to pay the Health levy. At or below €26000 you don't pay this levy.

If you are earning between €26001 to approx €27500 it actually makes sense to pay the excess over €26000 into a pension fund as this will bring your earnings below the 'magic value' of €26000, thereby avoiding the levy. Earning anything over €27500 will cover the health levy.

1der

So if I am earning E27000 I am best off (for both my sake and my employers) to ask for a pay-cut of E1000?

absolutely ridiculous! why don't they just do it on a scaled basis? And Am I right in thinking that this is by a weekly wage rather than a yearly so, I could also ask for irregular hours as a way of earning more rather than more hours?

Is this just an Irish thing or is it in other countries too?

namenotavailablE

So if I am earning E27000 I am best off (for both my sake and my employers) to ask for a pay-cut of E1000?

You would be even better off to start paying into a pension fund (€1000 pa) rather than take a paycut. That way, you'd create a 'pension asset' (long term but better to have it than not) and your net pay would be the same as if you were earning €26000 pa.

It's a crazy, tortuous system- the 'mind' of the person who created it is indescribable. Brian Lenihan signalled that he's intending to review the whole 'levy system' for next December's budget- hopefully it will be more straightforward and equitable.

I don't know if it applies elsewhere.

The levy is paid on a "per payday" basis so the €26000 is divided by 12 for monthly paid/ 26 for fortnightly etc.

Mr. Incognito

The problem with this is the mindset of the government.

They don't have the balls to just say okay- we're going to increase the standard rate of tax from 20% to 25% or whatever needs to be done.

They bring in a "temporary levy" that they think is palatable to people but in fact make a hames of it's implimentation as it has to have a kick in threshold.

This is the same government that when it brought in the levy didn't account for the drop in gross PAYE intake because the levy was coming off the gross amount and as such would reduce PAYE at the bottom line.

In short, it's stupid. They are stupid and the whole idea of this Levy needs to be scrapped and the standard rate adjusted accordingly.

1der

My employer says that I don't have a pension until after so many months. Can I just ask them to throw that 1000 towards a pension or is that not how it works?

namenotavailablE

You could ask your employer if you [not him/her] can contribute to a PRSA through payroll- that way you'd get the tax/PRSI etc relief as you get paid.

It sounds as if your employer may have thought that you were asking him/her to pay into a pension on your behalf out of his/her own pocket rather than facilitating you making such a payment from your monthly pay. Basically, your employer will pay you your salary after deducting the pension premium and will then pay your pension deduction over to a pension company.

sawilson2003

namenotavailabl wrote: »

You could ask your employer if you [not him/her] can contribute to a PRSA through payroll- that way you'd get the tax/PRSI etc relief as you get paid.

It sounds as if your employer may have thought that you were asking him/her to pay into a pension on your behalf out of his/her own pocket rather than facilitating you making such a payment from your monthly pay. Basically, your employer will pay you your salary after deducting the pension premium and will then pay your pension deduction over to a pension company.

You employer is not obliged by law deduct pension payments at your request as you are not an excluded employee (you will be elligable for the pension scheme after 6 months)

FIAT 00

Hey there,

I was told by the Social welfare that you pay the Health Levy at the rate of 4% when you go over 500 EUR per week and with a gross salary of EUR 26000 per annum you do go over 500eur , it will be EUR 541.66 so you will still pay the health levy at the 4%...it's very confusing ...is anyone earning EUR 26000???? Can you advice what's your final net at the end of the month...I'm looking 4 this answer for the last 2months....and need to check if it's worthed to take 26 or go below it..thanks

namenotavailablE

You can check your net using my calculator at http://taxcalc.eu/monthlyss.

For a single person on standard tax credit & cut-off point values earning gross €541.66 per week (which is €28166 gross per year), I calculate the following:

Gross              541.66
PAYE                37.95
PRSI                16.58
Income levy         10.83
Health contribution 21.67
Net pay per week   454.63

For €26000 per year, these are the results:

Gross              500.00
PAYE                29.62
PRSI                14.91
Income levy         10.00
Health contribution -----
Net pay per week   445.47

You could suggest the following to your employer- ask him to pay you €500 per week for all except the last week. In the last week, you get the balance (a sort of Christmas bonus). You'll only pay the Health levy on the final weeks bonus and earn a total net of €24624 in the year, compared to €23641 if you earn €541.66 pw.

FIAT 00

That's really low..I have used few websites and they are different:

Is this website correct?

http://www.redoaktaxrefunds.ie/budget-calculator-ireland

namenotavailablE

To get the absolutely correct net pay you'd need to know your exact tax credits and cut-off point. The example figures were computed for a single person with 'totally standard' data. If you are married / pay rent/ are in a trade union/ pay a pension etc etc you will probably have different net values.

Redoak is pretty accurate but as per above, it depends on your particular circumstances.

Another point to be aware of is that the Redoak site provides monthly values- there are slightly more than 4 weeks per month (it's 52/12) so you wouldn't get the right monthly pay by multiplying the above values by 4. If you multiply by 52 and divide by 12 you'll get €1970 net per month (same as Redoak)

FIAT 00

I don't know then but Red Oak is telling me that the net per month is 1930.00 and with an income of 27000 is 1902.00..

Maybe there is a problem on the website for an income over 26k....dunno...

namenotavailablE

The figures are correct, believe it or not!

On €27000, a single person (standard data etc) will earn €1902 net per month.
If they earn €26000, the person doesn't pay the health levy at all and they will net €1930 per month! The reason is that the person pays the Health Levy on ALL their income once they earn more than €26000.

That's the trouble with the health levy- it costs the employee a FORTUNE and can actually mean that a pay rise would result in a net pay reduction.

Have a look at my suggestion in the post at 15.49pm (Christmas bonus idea)- it's a possible way around this penalty.

FIAT 00

when I rang the Social Welfare they told me that people have to pay the health levy when they go over EUR 500.00 per week infact if you calculate 26000/12 is EUR 2166.66 and per week is EUR 541.66 gross so my question now is another one..Does the health levy starts from an earning of EUR 550.00 gross per week or EUR 500.00???

namenotavailablE

You divide €26000 by 52 to get €500 per week. That's the threshold for the health levy.

You were making a calculation error by assuming each month is 4 weeks- it's not!

FIAT 00

OPs...sorry...you are totally right..because if you do 4 weeks it gives you more per week...so basically 27k is crap because you just end up paying the health levy which is EUR 90 per month...that's loadz of crap..I think is better 28k or 30k..what do you think?

namenotavailablE

I think the best thing is any of the following:

1. Go with the Christmas bonus idea
2. Consider paying into a pension fund anything over €26000 per annum

Once you go above €27500 per annum you're ahead of where you'd be at €26000 per annum. Anything below that I'd suggest either of the 2 ideas above.

K-9

Mr. Incognito wrote: »

This is the same government that when it brought in the levy didn't account for the drop in gross PAYE intake because the levy was coming off the gross amount and as such would reduce PAYE at the bottom line.

What do you mean by that?

namenotavailabl wrote: »

You can check your net using my calculator at http://taxcalc.eu/monthlyss.

For a single person on standard tax credit & cut-off point values earning gross €541.66 per week (which is €28166 gross per year), I calculate the following:

Gross              541.66
PAYE                37.95
PRSI                16.58
Income levy         10.83
Health contribution 21.67
Net pay per week   454.63

For €26000 per year, these are the results:

Gross              500.00
PAYE                29.62
PRSI                14.91
Income levy         10.00
Health contribution -----
Net pay per week   445.47

You could suggest the following to your employer- ask him to pay you €500 per week for all except the last week. In the last week, you get the balance (a sort of Christmas bonus). You'll only pay the Health levy on the final weeks bonus and earn a total net of €24624 in the year, compared to €23641 if you earn €541.66 pw.

That's a good idea, never thought of that.

Red Oak Tax Refunds: John

Hadn't noticed this post before - the way the health levy is charged is a joke. You can see here an example of the cost of the health levy we put together a year ago .

Some things are plain wrong. I think they got away with it in previous years as the Health Levy was only 2% instead of 4%, so not such a big issue, but I'm really surprised more people aren't commenting on it.

But there is some talk of the Health Levy disappearing this year and being replaced by a "Universal Social Charge" (USC). This would replace the Income Levy, the Health Levy and PRSI deductions with a single charge.

It would wipe out the problem described above, but I'm thinking it would need some level of preparation that would have resulted in more 'talk' about it, so unlikely to happen.

Any one think they'll bring in the USC?

K-9

Red Oak Tax Refunds: John wrote: »

Hadn't noticed this post before - the way the health levy is charged is a joke. You can see here an example of the cost of the health levy we put together a year ago .

Some things are plain wrong. I think they got away with it in previous years as the Health Levy was only 2% instead of 4%, so not such a big issue, but I'm really surprised more people aren't commenting on it.

But there is some talk of the Health Levy disappearing this year and being replaced by a "Universal Social Charge" (USC). This would replace the Income Levy, the Health Levy and PRSI deductions with a single charge.

It would wipe out the problem described above, but I'm thinking it would need some level of preparation that would have resulted in more 'talk' about it, so unlikely to happen.

Any one think they'll bring in the USC?

That anomaly is always there, remember being caught in it a few years back too.

If I'm not mistaken similar can happen when going onto the 41% tax rate from the 20% rate.

Red Oak Tax Refunds: John

Not quite the same K-9. With the health levy you switch from exempt on all income to, bang, charged the full whack on all income, whereas with the change to 41% you are charged 41% on the amount above your standard rate band rather than on ALL your income.