Tax question, please help!

Wanderer2010

Hi people, im not sure if this is the right forum to start this thread but i could not see any other tax or employment thread (apologies if i missed it) but i have a question about tax and overtime and would be grateful for a response:

So here is the thing, i work in the private sector and im taxed at the 21% rate but next year i will get my annual rise and be taxed at the higher 42%. But for the time being i do lots and lots of overtime at work and when im submitting it im careful that my monthly salary doesnt exceed the standard rate cut-off point but a few months i have been stung and the total of my normal salary and my overtime hours has meant some of it taxed at the highrer rate.

My workmates tell me its not worth doing so much overtime as i get screwed on tax credits next year, i dont really understand this as i thought your tax credits were a fixed figure or does it depend on your yearly earnings? Also, my boss says i can claim back any of the overtime i worked that was charged at the higher rate of tax at the end of the year; again i dont fully understand this as im not the best with tax and calculations.

If anyone out there can confirm is the overtime going to decrease my tax credits next year and also how to claim back overtime taxed at the higher rate i would be grateful.

Thanks.

The Recliner

Moved from Economics, you will probably get a better response here

namenotavailablE

My workmates tell me its not worth doing so much overtime as I get screwed on tax credits next year

This doesn't make sense to me- your tax credits are computed based on your personal and employment circumstances (married/single; employee/self-employed; renting/ not renting etc). Whether you work overtime or not is irrelevant to the amount of your credits- obviously, it will increase the amount of tax that you pay, however [more income => more tax].

my boss says i can claim back any of the overtime i worked that was charged at the higher rate of tax at the end of the year

Your boss might be referring to the possibility of recovering some of the Health Contribution, although this depends on your income. basically, if you earn under €26000 pa in a year (this is the figure after deducting any pension contributions you make) but in some months earn a large amount due to overtime, you'll end up paying the Health Contribution in the 'high-pay' months. However, once the €26000 value for the overall year isn't breached, you can recover that Health Contribution.
Another way of reducing the tax is to start paying into a pension fund through your payroll. If you pay enough between now and 31 December, your tax bill will reduce which may help to recover the 41% tax.
Other than that, I'm not sure what else a PAYE employee can do to recover tax/ levies.

You might be interested in my tax calculator spreadsheet to figure out the impact of paying into a pension/ receiving a bonus etc on your pay. It also has a tool to calculate if the Health Levy is refundable. If you need a hand using it send a PM to me or use the address on the spreadsheet.

You can download the spreadsheet here:
http://taxcalc.eu/monthlyss

Wanderer2010

Thanks very much for that very helpful

barneystinson

I think we can disregard the possibility of this being anything to do with health contribution, as the OP says his annual pay-rise will push his salary into the high tax bracket - suggesting a normal salary that is already well in excess of €26k.

Anyway, OP - The simple answer is no, you will not get "screwed" on your tax credits next year.

If you want to get to the bottom of this you'll need to give a bit more information. For example do you know if your employer is operating a proper payroll? do you get printed payslips every week / month? If so, does it state anywhere on the payslip that you're "Basis" is Week1/Month1, or does it show cumulative or "YTD" (Year to Date) figures for your pay and tax?

Based on the bit of information you've given it may be possible that you're employer is taxing you in each pay period, without regard to the previous pay period, which is not strictly speaking correct. This would explain why, when you get caught for high rate tax in one or a few months, you might not be refunded it automatically thru the payroll the following month, but after the end of the year you can recover any overpayment from the Revenue Commissioners...

Or maybe I'm way off the mark, it's impossible to say until/unless you can shed a bit more light from your end...

Wanderer2010

barneystinson wrote: »

I think we can disregard the possibility of this being anything to do with health contribution, as the OP says his annual pay-rise will push his salary into the high tax bracket - suggesting a normal salary that is already well in excess of €26k.

Anyway, OP - The simple answer is no, you will not get "screwed" on your tax credits next year.

If you want to get to the bottom of this you'll need to give a bit more information. For example do you know if your employer is operating a proper payroll? do you get printed payslips every week / month? If so, does it state anywhere on the payslip that you're "Basis" is Week1/Month1, or does it show cumulative or "YTD" (Year to Date) figures for your pay and tax?

Based on the bit of information you've given it may be possible that you're employer is taxing you in each pay period, without regard to the previous pay period, which is not strictly speaking correct. This would explain why, when you get caught for high rate tax in one or a few months, you might not be refunded it automatically thru the payroll the following month, but after the end of the year you can recover any overpayment from the Revenue Commissioners...

Or maybe I'm way off the mark, it's impossible to say until/unless you can shed a bit more light from your end...

Thanks for your help and big apologies for the delay replying

To answer your question, my salary is 33,000 per year and will actually freeze next yr (news i learned last week) so it wont exceed the 20% tax bracket. I do get a printed pay slip from the payroll dept every month. It doesnt say Basis Month 9 etc it just says Pay Period:9. And for the Gross Pay and 'Reckonable Earnings' (a figure i dont understand) it lists my figure for that particular month in one column and then 'Year to Date' in the next.

I understand my tax credit figures and my std rate cut off point, however your point above about possibly claiming a refund on any higher tax paid is a little confusing-are you saying that i can submit a claim to the tax office at the start of the new year to get back any tax i paid at 42% during the previous year? What would i be handing into them, my P45? Dont mean to appear clueless but the truth is im not great with following the whole tax/PRSI thing.

A reply clarifying the above would be much appreciated thanks.