How do the income tax bands actually work??

rolexeagle1

I have a base salary but also get commission.

I know that if you earn over €32,800 the take rate jumps from 20% to 41%

I have not earned over that amount this year. But it seems that I have been paying a higher amount of tax (41%) past a certain point in may salary some months.

It the amount I make per month + commission taxed @20% to a certain level and the balance at 41%.

I cant figure out why I would be taxed at all at 41% when I have not earned more that €32,800

namenotavailablE

The €32800 is spread out over the year- this gives a value of €2,733 per month. You would have received a certificate of tax credits and standard rate band from the tax office usually in late January/ early February showing the value.

Once your monthly earnings are under €2733, you will be taxed at 20% on those earnings (the calculation actually is done on an a "cumulative basis", so if in month 1 total earnings are under 1x2733, it's 20%; in month 2 if total earnings are 2x 2733=5466 it's 20% and so on).
In the months where you get commission, you are probably brought into the 41% rate. However, over the course of the year it should even out.

I've a spreadsheet calculator (see my signature) which you might find useful.

rolexeagle1

namenotavailabl wrote: »

The €32800 is spread out over the year- this gives a value of €2,733 per month. You would have received a certificate of tax credits and standard rate band from the tax office usually in late January/ early February showing the value.

Once your monthly earnings are under €2733, you will be taxed at 20% on those earnings (the calculation actually is done on an a "cumulative basis", so if in month 1 total earnings are under 1x2733, it's 20%; in month 2 if total earnings are 2x 2733=5466 it's 20% and so on).
In the months where you get commission, you are probably brought into the 41% rate. However, over the course of the year it should even out.

I've a spreadsheet calculator (see my signature) which you might find useful.

So every month I go over €2,733 anything after that is taxed at 41%. It is not a case of you don;t get taxed at 41 until you have earned €32,800 in a single year?

namenotavailablE

No- they spread the €32800 out.
If they waited until you hit €32800 aggregate earnings before taxing you at 41%, you'd suddenly be hit with massive tax deductions which would be awful bad news
Doing it this way tries to 'minimise the shock'.

EDIT: Your first statement ["So every month I go over €2,733 anything after that is taxed at 41%."] is correct.

rolexeagle1

namenotavailabl wrote: »

No- they spread the €32800 out.
If they waited until you hit €32800 aggregate earnings before taxing you at 41%, you'd suddenly be hit with massive tax deductions which would be awful bad news
Doing it this way tries to 'minimise the shock'.

EDIT: Your first statement ["So every month I go over €2,733 anything after that is taxed at 41%."] is correct.

Thanks mate. Pulled your calculator too, its great!