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tax credits

  • 20-01-2017 10:15pm
    #1
    maestroamado
    Registered Users, Registered Users 2 Posts: 4,425 ✭✭✭


    My friend is about to take up a work pension.
    Their personal situation is widowed with no dependents.
    The pension people are asking for tax credits.

    What is the total amount they can earn including the state widows pension? There is an option to take "lump sum" tax free but not the prefered option unless it the most tax effective.

    Also i was looking on-line and as far as i can figure out €18,000 is the allowance for a single person before tax.
    Then there are tax credits, are these added to the single allowance.
    I find it all a bit confusing.
    Any advice appreciated.

    Many thanks


Comments

  • #2
    relax carry on
    Registered Users, Registered Users 2 Posts: 4,113 ✭✭✭relax carry on


    maestroamado wrote: »
    My friend is about to take up a work pension.
    Their personal situation is widowed with no dependents.
    The pension people are asking for tax credits.

    What is the total amount they can earn including the state widows pension? There is an option to take "lump sum" tax free but not the prefered option unless it the most tax effective.

    Also i was looking on-line and as far as i can figure out €18,000 is the allowance for a single person before tax.
    Then there are tax credits, are these added to the single allowance.
    I find it all a bit confusing.
    Any advice appreciated.

    Many thanks

    The 18000 figure you refer to is an exemption figure for a single person over 65. If they have taxable income over 18000 then they are into the normal taxation system as outlined below for the full amount of taxable income.

    A single persons rate band is 33800 for the year. This is the amount you can earn in the year taxed at the lower rate of 20%. Anything above this is taxed at the higher rate of 40%.

    Say you earn 20000 in the year; since its below, the rate band level of 33800, it's all taxable at 20%. You would be due to pay 4000 on your 20000 however this is where the tax credits come in to play.

    A single person has two standard credits which add up to 3300. This comes off the 4000 in the above scenario meaning you'd pay 700 in paye altogether for the year.

    The above is based on a full 12 months. Divide everything by 12 for a monthly figures or 26 for bi weekly or 52 for weekly paid.


  • #3
    Just Retired
    Registered Users, Registered Users 2 Posts: 18 ✭Just Retired


    Tax Credits €2,190.00c (Personal)+€1650.00c (PAYE) and when you reach 65 years you get what is termed an age credit of €245.00c
    Giving a total of €4085.00c for the year. The age credit is given for the complete year, so if & when you reach 65 in 2017, even if it is late on in the year,you get the said credit for the entire of 2017.


  • #4
    towger
    Registered Users, Registered Users 2 Posts: 440 ✭✭towger


    Is the personal tax credit for widowed with no dependent not €2,150 ?


  • #5
    maestroamado
    Registered Users, Registered Users 2 Posts: 4,425 ✭✭✭maestroamado


    relax carry on wrote: »
    The 18000 figure you refer to is an exemption figure for a single person over 65. If they have taxable income over 18000 then they are into the normal taxation system as outlined below for the full amount of taxable income.

    A single persons rate band is 33800 for the year. This is the amount you can earn in the year taxed at the lower rate of 20%. Anything above this is taxed at the higher rate of 40%.

    Say you earn 20000 in the year; since its below, the rate band level of 33800, it's all taxable at 20%. You would be due to pay 4000 on your 20000 however this is where the tax credits come in to play.

    A single person has two standard credits which add up to 3300. This comes off the 4000 in the above scenario meaning you'd pay 700 in paye altogether for the year.

    The above is based on a full 12 months. Divide everything by 12 for a monthly figures or 26 for bi weekly or 52 for weekly paid.

    This is pretty much the situation as the total income be 19800.
    However there is an option to take "lump sum" cash 30000 tax free from the pension fund.
    The example you give says tax 700 pa.
    The person would rather leave it in the pension but may not be the best option.
    I calculated that if they take the "lump sum" and the smaller amount in annual pension it take 14 years before it catches up.
    I will now have to factor in the 700 and see where its at.

    I just discovered after posting that the total of personal pension + state pension be 18150 even after taking the larger "lump sum" cash.
    Is it likely this will all be charged with the said 20% minus tax credits.
    Regards and thanks for all advise.


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