[income tax] Tax rates, bands and reliefs

nevvermind

Hey guys,
I will move to Ireland in November and have a few basic questions that I couldn't answer by using google. I would be very happy if you could help me.
1)
My understanding is that there are two different income tax rates - 20% (up to €34.550) and 40% (above €34,550). Let's assume my annual income will be €45.000, which means €3750/month. Let's further assume I'll start working in November 2018. This means there will be 2 months for the tax year 2018 (right?).
Does that mean I would only pay 20% tax on my income for 2018?
2)
Let’s further assume I'll get a relocation bonus of - €7.500 (gross, will be taxed) in my first full pay check. Would that too be taxed with a 20% tax rate because my annual income would only be (2x €3750 + 1x €7500) €15.000?
Thank you!

gerrybbadd

nevvermind wrote: »

Hey guys,
I will move to Ireland in November and have a few basic questions that I couldn't answer by using google. I would be very happy if you could help me.
1)
My understanding is that there are two different income tax rates - 20% (up to €34.550) and 40% (above €34,550). Let's assume my annual income will be €45.000, which means €3750/month. Let's further assume I'll start working in November 2018. This means there will be 2 months for the tax year 2018 (right?).
Does that mean I would only pay 20% tax on my income for 2018?
2)
Let’s further assume I'll get a relocation bonus of - €7.500 (gross, will be taxed) in my first full pay check. Would that too be taxed with a 20% tax rate because my annual income would only be (2x €3750 + 1x €7500) €15.000?
Thank you!

There's a lot of variables here.

The way tax bands work, you don't "expire" the full 20% band and then graduate to the 40% band for the rest of the year.

The 20% band is divided into 52/26/12 (depending on how you are paid). So you pay 20% on the amount of tax band for that week (say it's the first week of the year), and then 40% on the balance.

If you are starting work in Nov, the odds are you will be placed on a week 1 basis (depending on your circumstances, residency intentions etc, this could change). If this is the case, you will get 1 weeks worth of allowances, every single week, up to the end of the year. Every week is as if it was the first of the year - there's no reference back to "accumulated" allowances.

However, if you are put on a cumulative tax basis, then the allowances will back date to the start of the year, and you'll likely pay 20% on everything up to the end of the year.

In reference to the lump sum payment, this will be put in on top of your weeks / months wage, and taxed accordingly (i.e. week 1 basis or cumulative).

Be sure to get yourself off emergency tax ASAP though - this can all be done in the Jobs & Pensions section of revenue.ie

namenotavailablE

Try the free version of my spreadsheet (second one in the list on the website) at http://taxcalc.eu/monthlyss/ for this query.

nevvermind

Thanks for your answers and sorry for the late reply, I had problems accessing boards.ie

gerrybbadd wrote: »

The 20% band is divided into 52/26/12 (depending on how you are paid). So you pay 20% on the amount of tax band for that week (say it's the first week of the year), and then 40% on the balance.

If you are starting work in Nov, the odds are you will be placed on a week 1 basis (depending on your circumstances, residency intentions etc, this could change). If this is the case, you will get 1 weeks worth of allowances, every single week, up to the end of the year. Every week is as if it was the first of the year - there's no reference back to "accumulated" allowances.

However, if you are put on a cumulative tax basis, then the allowances will back date to the start of the year, and you'll likely pay 20% on everything up to the end of the year.

In reference to the lump sum payment, this will be put in on top of your weeks / months wage, and taxed accordingly (i.e. week 1 basis or cumulative).

Be sure to get yourself off emergency tax ASAP though - this can all be done in the Jobs & Pensions section of revenue.ie

Thanks for this great explanation and the tip with the emergency tax! I will be paid on a monthly base (25th of every month).

namenotavailabl wrote: »

Try the free version of my spreadsheet (second one in the list on the website) at for this query.

Thanks, I'll try it out!