Tax on rental income as a PAYE tax payer

Sun in Capri

Hi All,

Am I correct that tax on rental income is taken from salary if you are a paye tax payer? If this is the case, is the amount amount taken in one go or how is it deducted?

Many thanks.

Stheno

I can't see how that could be possible tbh, how would your employer know what to deduct?

Moonbeam

No,it would be next to impossible to do that.
http://www.revenue.ie/en/tax/it/rental-income.html

You do an annual tax return and the tax bill can be steep.

zefer

Sun in Capri wrote: »

Hi All,

Am I correct that tax on rental income is taken from salary if you are a paye tax payer? If this is the case, is the amount amount taken in one go or how is it deducted?

Many thanks.

Hi op

No, that is totally incorrect. You have to make a tax return declaring your rental income by filling out a p12 (nearly sure that's right one) form. Meant to do it by oct 31st each year for the previous years income..

Stheno

zefer wrote: »

Hi op

No, that is totally incorrect. You have to make a tax return declaring your rental income by filling out a p12 (nearly sure that's right one) form. Meant to do it by oct 31st each year for the previous years income..

The deadline is mid November for online tax returns

Sun in Capri

Thanks All. I did my tax return and I got a form P21 from Revenue which seems to be saying that the amount due will be deducted from my PAYE earnings, possibly by having my tax credits reduced. I am unsure how it will be done, hence my post. I was under the impression that I would pay rental income tax separately and not through PAYE! I thought maybe someone on here would know. I guess I shall have to phone Revenue - thanks for your posts.

Stheno

Sun in Capri wrote: »

Thanks All. I did my tax return and I got a form P21 from Revenue which seems to be saying that the amount due will be deducted from my PAYE earnings, possibly by having my tax credits reduced. I am unsure how it will be done, hence my post. I was under the impression that I would pay rental income tax separately..

Revenue can reduce your tax credits to recoup an underpayment of tax, so that does make sense

Sun in Capri

Thanks Stheno - maybe that is what they are doing. I wonder why they did it this way and didn't treat it separately and let me pay separately.

Stheno

Sun in Capri wrote: »

Thanks Stheno - maybe that is what they are doing. I wonder why they did it this way and didn't treat it separately and let me pay separately.

Yeah that does sound a bit weird

Gmaximum

Hi OP

Yes they'll deduct your tax credits for next year. That's how mine has be treated the last few years. Don't know at what point they'll actually look for the money and not reduce credits though

Sun in Capri

Gmaximum wrote: »

Hi OP

Yes they'll deduct your tax credits for next year. That's how mine has be treated the last few years. Don't know at what point they'll actually look for the money and not reduce credits though

Thanks Gmaximum, I will give them a call and see how it works exactly. I am guessing that by reducing the tax credits we would be paying tax on more income and that this will be done until tax has been paid on the amount due via rental income - if I am making sense. Probably less painful than paying the tax in one go!

Stheno

Sun in Capri wrote: »

Thanks Gmaximum, I will give them a call and see how it works exactly. I am guessing that by reducing the tax credits we would be paying tax on more income and that this will be done until tax has been paid on the amount due via rental income - if I am making sense. Probably less painful than paying the tax in one go!

That's exactly how it's done, they will reduce your PAYE tax credit to cover the amount owed, so you'll pay that bit extra in tax each month, it's balanced out over the year.

SO if you have a liability of €600, then your tax credit will be reduced by €50 per month

SK76

I had some rental income for the first time lady year and did an online return a few weeks back. They also reduced my credits for next year. At least it spreads it out over year. There is probably a limit where if your non PAYE income rises to a certain limit that they would ask for a one off payment.

Sun in Capri

SK76 wrote: »

I had some rental income for the first time lady year and did an online return a few weeks back. They also reduced my credits for next year. At least it spreads it out over year. There is probably a limit where if your non PAYE income rises to a certain limit that they would ask for a one off payment.

Yes SK76, it is good that it is spread out over the year. I was not expecting that as a possibility at all. A nice surprise from Revenue..... I must pinch myself.

Thank you all for taking the time to reply to my post. Very much appreciated.

Moonbeam

Interesting, I never heard of doing it that way but they will let you pay it monthly.
Alot of the time as as a PAYE worker all your tax credits are long gone before rental income.

zefer

Sun in Capri wrote: »

Yes SK76, it is good that it is spread out over the year. I was not expecting that as a possibility at all. A nice surprise from Revenue..... I must pinch myself.

Thank you all for taking the time to reply to my post. Very much appreciated.

If you contact them, they do accept cheques for the money owing instead of tax deduction if you prefer. I paid it up front last year. Give them a call, they are actually very helpful

godtabh

You can also file and pay

Mrs OBumble

Moonbeam wrote: »

Interesting, I never heard of doing it that way but they will let you pay it monthly.
Alot of the time as as a PAYE worker all your tax credits are long gone before rental income.

This is not new.

If you have extra income from any source, you can ask Revenue to allocate some of your PAYE tax credits against it: effectively the tax you pay via your employer is higher than would be, to cover the tax on your other income.

The is a good thing to do if you are poor at managing money.

But most people should be able to manage their cash themselves, putting some of the other income (rents or whatever) into a separate account and earning interest on it until it has to be paid to revenue.

ted1

Ask you dont really understand how it works get yourself a good book keeper or an accountant who has experience with rental returns, they will be able to minimise the return and perhaps even reduce your tax liability to nil.


What deductions did you make from your rental income ?