calculating a tax rebate (assuming of course you get it)

amacca

Mods...I think this is the appropriate forum for this question...if not I apologize and please feel free to delete/move as necessary.


I was just wondering if any poster here could help me with an answer


I have heard you can put business losses against tax paid on PAYE income in order to get a rebate.

My question is assuming you are allowed the rebate how is it calculated?

eg: say you pay 41% tax on some of your PAYE income and the total paid at this rate comes to €10,000

if you make a business loss of €10,000 in the same year can you

1) put this against the tax and get the full €10,000 back (presume not----that would likely be wishful thinking on my part )

2) put this against the tax and get 41% of the €10,000 back....€4,1000

3) carry forward less losses and put more than €10,000 of a loss against the €10,000 tax paid in order to get more of a rebate


genuinely confused here.....how do you calculate what the rebate should be.....how do you calculate what the maximum rebate you could get would be and how much losses you have to make to get it

is there a formula?........apologies if this is a basic question and I'm guilty of complete and total ignorance

barneystinson

I presume the "business losses" you're asking about are losses incurred in a self-employed trade (one that is registered!)?

Assuming that is the case:

If you make a loss in the trade, you can choose to set off the amount of your losses against other income, in the same year.

Forget about what rate of tax you are paying for a minute.

Lets say you're earning 40k in your PAYE job, and you have a business on the side that incurs a loss of 4k.

In this case you can choose to have the 4k loss used to reduce your other income. So your income liable for income tax in that year would then become 36k (40k - 4k).

And that income is then taxed at the appropriate rates...

So, if you understand that then you can think in terms of what tax rate you are paying:
If as in the example you are a single person earning 40k, you will have paid tax at 41% rate on the amount in excess of 32,600. So if you reduce your income by 4k then you will effectively save yourself tax of 4k x 41%.

amacca

barneystinson wrote: »

I presume the "business losses" you're asking about are losses incurred in a self-employed trade (one that is registered!)?

Assuming that is the case:

If you make a loss in the trade, you can choose to set off the amount of your losses against other income, in the same year.

Forget about what rate of tax you are paying for a minute.

Lets say you're earning 40k in your PAYE job, and you have a business on the side that incurs a loss of 4k.

In this case you can choose to have the 4k loss used to reduce your other income. So your income liable for income tax in that year would then become 36k (40k - 4k).

And that income is then taxed at the appropriate rates...

So, if you understand that then you can think in terms of what tax rate you are paying:
If as in the example you are a single person earning 40k, you will have paid tax at 41% rate on the amount in excess of 32,600. So if you reduce your income by 4k then you will effectively save yourself tax of 4k x 41%.

aaaaaah...lightbulb moment....thank you for your help..............I was thinking about it all wrong

are there limits to the amount you can offset in any one year?....as a percentage of your PAYE income perhaps?

barneystinson

amacca wrote: »

aaaaaah...lightbulb moment....thank you for your help..............I was thinking about it all wrong

are there limits to the amount you can offset in any one year?....as a percentage of your PAYE income perhaps?

No, if your trade loss exceeds your PAYE income then you would have zero income and therefore no tax liability.

But if that was the case there would be a fairly good chance of getting a Revenue audit, as it would raise questions about how a person managed in such circumstances.

So if you're planning on offsetting a big loss against your PAYE income, I'd suggest you be very happy that all the T's are crossed and the I's dotted..!

amacca

barneystinson wrote: »

No, if your trade loss exceeds your PAYE income then you would have zero income and therefore no tax liability.

But if that was the case there would be a fairly good chance of getting a Revenue audit, as it would raise questions about how a person managed in such circumstances.

So if you're planning on offsetting a big loss against your PAYE income, I'd suggest you be very happy that all the T's are crossed and the I's dotted..!

understood....know what you mean and tks again