Tax credits reduced for 4 years - impact on take home pay

eskimo_undercov

Hello everyone. In 2020 I was made reduntant and my severance package was taxed incorrectly so I applied for a refund which I was given. It now occurred, as I applied for remote work relief (€58 yay), that I underpaid tax by €2300 that year. So for the next 4 years I'll be paying that back by having tax credits reduced by €575 per year. Is there a way to calculate the impact on my take home pay? I asked Revenue but got no reply. Thanks!

Buddy Bubs

You've answered it in your question.

Your take home pay will be reduced by 2300 in 4 years so calculate that whether you get paid weekly or monthly or fortnightly or whatever

So it's about a tenner a week.

That's assuming nothing changes in tax system between now and then. Which it will, with each successive budget in the next 4 years.

Gaillimh1976

Your take home pay will reduce by exactly the amount of tax credit reduction

So 575 in your case

Divide by 12/26/52 depending on if you’re paid Monthly/fortnightly/weekly

Mongfinder General

You won’t be down anything - the tax cuts to PAYE and additional tax credit will cover that amount per annum

eskimo_undercov

Thank you all for the answers. So at first indeed I thought it will be as simple as dividing the annual amount by 12 as I get paid monthly. But then I thought hang on - the tax credit is simply the amount over which your earnings get taxed. So if I get a tax credit decrease of €48 per month perhaps it means that that €48 will be subject to a tax of whatever 20 or 40%. Meaning that the impact on my take home pay should be €48 minus say 60% so the impact would be significantly reduced vs actual €48. Or am I talking through me a**e? :) Thanks again for your help.

namenotavailablE

You are confusing tax credits with standard rate bands.

As per earlier posters, your annual loss in net take home pay will be €575 each year for the next 4 years (ignoring any impact of the upcoming budget) or approximately €48 per month.

eskimo_undercov

Ha! I suspected that I was talking through me a**e :) Thank you for clarifying.