Why is my net pay higher after switching to cumulative tax?

lizzie92

Hi everyone,

I searched for a similar topic on this forum but couldn't find a straight answer to this.

Long story short, I changed jobs in the middle of November 2020. In my previous job, I was on a cumulative tax basis and I worked there for 3 years. When I changed jobs, the new company's accountant noticed that I was put on Week 1 basis and advised me to change it back to cumulative. My first weekly paycheck from the new company was a total of approx €370 net pay. After changing it to cumulative basis in the second week, my second paycheck reads approx €1100, even though I worked the same amount of hours.

Can anyone explain this to me in simplest words possible, does this mean I overpaid tax in my previous job? Will this amount be taken away next year? In other words, is this amount really mine to take, or will I be taxed higher from January onwards?

The accountant told me it would be better for me financially to be back on cumulative basis. Is it really better?

This made me think about my partner's payslips and how he's always paying higher tax - we checked his tax certificates for previous years and surprise, surprise - he has been on Week 1 basis ever since he started working for the company (4 years ago).

Should my partner also change this to cumulative basis or will that result in tax increase next year? Note: His working hours change slightly from week to week, while mine are always the same.

I would really appreciate if someone could explain this to me. Thank you!

Buddy Bubs

lizzie92 wrote: »

Hi everyone,

I searched for a similar topic on this forum but couldn't find a straight answer to this.

Long story short, I changed jobs in the middle of November 2020. In my previous job, I was on a cumulative tax basis and I worked there for 3 years. When I changed jobs, the new company's accountant noticed that I was put on Week 1 basis and advised me to change it back to cumulative. My first weekly paycheck from the new company was a total of approx €370 net pay. After changing it to cumulative basis in the second week, my second paycheck reads approx €1100, even though I worked the same amount of hours.

Can anyone explain this to me in simplest words possible, does this mean I overpaid tax in my previous job? Will this amount be taken away next year? In other words, is this amount really mine to take, or will I be taxed higher from January onwards?

The accountant told me it would be better for me financially to be back on cumulative basis. Is it really better?

This made me think about my partner's payslips and how he's always paying higher tax - we checked his tax certificates for previous years and surprise, surprise - he has been on Week 1 basis ever since he started working for the company (4 years ago).

Should my partner also change this to cumulative basis or will that result in tax increase next year? Note: His working hours change slightly from week to week, while mine are always the same.

I would really appreciate if someone could explain this to me. Thank you!

Were you on TWSS in old job by any chance

lizzie92

Buddy Bubs wrote: »

Were you on TWSS in old job by any chance

I was on the Covid PUP from end of March till middle of June - I was sent home in March in my old job and returned to work in June.

Buddy Bubs

lizzie92 wrote: »

I was on the Covid PUP from end of March till middle of June - I was sent home in March in my old job and returned to work in June.

OK, do you know the difference between week 1 and cumulative basis for tax? If you do it will make it easier for me to explain, but I'll try either way

Mrs OBumble

lizzie92 wrote: »

I was on the Covid PUP from end of March till middle of June - I was sent home in March in my old job and returned to work in June.

Did your new-co accountant realise that?

I'd put this weeks extra cash into a bank account and keep it safe in case you need to pay it back

Your partner is a different story. S/he should get put on cumulative and also ask revenue for a balancing statement for previous years

lizzie92

Buddy Bubs wrote: »

OK, do you know the difference between week 1 and cumulative basis for tax? If you do it will make it easier for me to explain, but I'll try either way

Yes I know the very basics - I just got very confused when trying to understand the information I was reading on Revenue's website.

Buddy Bubs

lizzie92 wrote: »

Yes I know the very basics - I just got very confused when trying to understand the information I was reading on Revenue's website.

OK week 1 basis you get taxed on that weeks earnings only ignoring how much or little you earned in other weeks

Cumulative basis you are taxed on your cumulative income that year too date...

Your PUP payment this year will not be classed as income in your cumulative calculations so has triggered a refund. Social welfare is taxable though so if you've underpaid at end of year your credits will be reduced next year.

As for your partner, if he has indeed been on week 1 for last 4 years he should register on my account on ROS and request balancing statements p21 for 2016 to 2020 ASAP... The 2016 won't be available to claim back after this year.

You might want to talk to someone and run the numbers as its an exceptional year and there's only so much people on boards can do for you.

lizzie92

Mrs OBumble wrote: »

Did your new-co accountant realise that?

I'd put this weeks extra cash into a bank account and keep it safe in case you need to pay it back

Your partner is a different story. S/he should get put on cumulative and also ask revenue for a balancing statement for previous years

No, the accountant never asked and I didn't think it was important to mention. Should I let them know?

lizzie92

Buddy Bubs wrote: »

OK week 1 basis you get taxed on that weeks earnings only ignoring how much or little you earned in other weeks

Cumulative basis you are taxed on your cumulative income that year too date...

Your PUP payment this year will not be classed as income in your cumulative calculations so has triggered a refund. Social welfare is taxable though so if you've underpaid at end of year your credits will be reduced next year.

As for your partner, if he has indeed been on week 1 for last 4 years he should register on my account on ROS and request balancing statements p21 for 2016 to 2020 ASAP... The 2016 won't be available to claim back after this year.

You might want to talk to someone and run the numbers as its an exceptional year and there's only so much people on boards can do for you.

I forgot to mention that my partner was also on the PUP payment for a similar amount of time. Would that affect his circumstances too if he switched to cumulative?

So would you say that I will be better off on cumulative in this case or not?

Thanks for your patience!

Buddy Bubs

lizzie92 wrote: »

I forgot to mention that my partner was also on the PUP payment for a similar amount of time. Would that affect his circumstances too if he switched to cumulative?

So would you say that I will be better off on cumulative in this case or not?

Thanks for your patience!

Yeah cumulative keeps your tax up to date so you shouldn't be under or over paid. I don't think it's a choice anyway, you are meant to be on cumulative but this year only people on pandemic payments are staying on week 1 basis to stop triggering refunds. You should really engage someone to help with this armed with your actual figures and circumstances. The tax back crowds are usually pretty affordable

jrosen

Can I jump in here because I really have zero grasp on my tax!

Noticed when I returned to work after pup my take home was less than usual. My deductions were higher.
Same as op I am on week 1 basis.

I had been putting a little aside each week just in case I owed tax at year end.
Should I stay as I am?

I tried to submit some medical expenses and it won’t allow me. Is this linked?

Buddy Bubs

jrosen wrote: »

Can I jump in here because I really have zero grasp on my tax!

Noticed when I returned to work after pup my take home was less than usual. My deductions were higher.
Same as op I am on week 1 basis.

I had been putting a little aside each week just in case I owed tax at year end.
Should I stay as I am?

I tried to submit some medical expenses and it won’t allow me. Is this linked?

Yep, same thing, it's week 1 effect. Again, get onto tax back.com or someone like that and they'll do their thing. It's easy when they have the numbers in front of them.
Medical expenses are claimed back after the year end. We're you trying to claim 2020 medical?

jrosen

Buddy Bubs wrote: »

Yep, same thing, it's week 1 effect. Again, get onto tax back.com or someone like that and they'll do their thing. It's easy when they have the numbers in front of them.
Medical expenses are claimed back after the year end. We're you trying to claim 2020 medical?

No 2019

Buddy Bubs

jrosen wrote: »

No 2019

Not sure why that is so, might be related to pandemic payments

lizzie92

Buddy Bubs wrote: »

Yeah cumulative keeps your tax up to date so you shouldn't be under or over paid. I don't think it's a choice anyway, you are meant to be on cumulative but this year only people on pandemic payments are staying on week 1 basis to stop triggering refunds. You should really engage someone to help with this armed with your actual figures and circumstances. The tax back crowds are usually pretty affordable

Thank you, that really helps me understand it better. We also checked my partner's certificates again, turns out that he was only put on week 1 basis after returning to work this year, so my apologies for the confusion. He contacted revenue to get it changed to cumulative.

Many thanks for everyone's help on this matter!