Tax on social welfare payments and tax credits

screamer

It's something I've wondered about recently and wondered if someone more familiar with personal tax could give me some insight.
Scenario is as follows:
- married couple one made redundant, one working. Tax credits transferred but remember the PAYE credit is not transferable and is in effect, lost.
Now, the person who was made redundant is self employed and it's time to enter Med1 expenses. Tax is now calculated on the social welfare payments, before med1 amount is re-imbursed, but there is no offset of the personal tax credit against those "earnings". Surely, the tax credit should be able to be used???

gerrybbadd

screamer wrote: »

It's something I've wondered about recently and wondered if someone more familiar with personal tax could give me some insight.
Scenario is as follows:
- married couple one made redundant, one working. Tax credits transferred but remember the PAYE credit is not transferable and is in effect, lost.
Now, the person who was made redundant is self employed and it's time to enter Med1 expenses. Tax is now calculated on the social welfare payments, before med1 amount is re-imbursed, but there is no offset of the personal tax credit against those "earnings". Surely, the tax credit should be able to be used???

The person now self employed, can claim a credit called the Earned Income tax credit.

Social Welfare is added to the Joint income, and tax is calculated on that. The next step is the deduction of tax credits to arrive at the final liability.

Health Expenses Relief is given as a tax credit against the tax liability, at the standard rate of tax

screamer

gerrybbadd wrote: »

The person now self employed, can claim a credit called the Earned Income tax credit.

Social Welfare is added to the Joint income, and tax is calculated on that. The next step is the deduction of tax credits to arrive at the final liability.

Health Expenses Relief is given as a tax credit against the tax liability, at the standard rate of tax

Thanks, for this, for the year the expenses were incurred, the person was not self employed (they were on social welfare for 9 months) and started new business in the new year, so can they still claim the EIC? It is for 2013 also.

scheister

screamer wrote: »

Thanks, for this, for the year the expenses were incurred, the person was not self employed (they were on social welfare for 9 months) and started new business in the new year, so can they still claim the EIC? It is for 2013 also.

EIC was only introduced this year so not relevant here. The PAYE credit is only for you unlike the personal credit its not transferable.

Carawaystick

Revenue told me over the phone, and paid out on jobseekers benefit getting the paye credit. i.e. jobseekers benefit income tax can be reduced by the paye credit. So if you got 5000 jsb, you could use 1000 of the paye credit to avoid paying tax on that income.

Revenue wrote:

Am I entitled to the PAYE Employee tax credit?

Yes, the PAYE Employee tax credit is due to you if you are earning income that is taxed under the PAYE system. Therefore if you are in receipt of Jobseeker’s Benefit you will be entitled to the PAYE Employee tax credit unless it has been allowed already against other PAYE income you may have.

You do not have to apply for this credit as it will be automatically granted if you are entitled to it.

http://www.revenue.ie/en/tax/it/leaflets/it24.html

gerrybbadd

Carawaystick wrote: »

Revenue told me over the phone, and paid out on jobseekers benefit getting the paye credit. i.e. jobseekers benefit income tax can be reduced by the paye credit. So if you got 5000 jsb, you could use 1000 of the paye credit to avoid paying tax on that income.




http://www.revenue.ie/en/tax/it/leaflets/it24.html

The PAYE tax credit will go against the JS Benefit only for the non assessable person.

So, if you, as the Assessable spouse, with your wife's tax credits, get JS benefit, you can't then get an extra 1000 from your wife to cover your JS Benefit