The first tax most people will encounter is the universal social charge, which, from January next year, will be levied at a rate of 0.5 per cent on the first €12,012 of income from January 2017 (assuming you earn more than €13,000 – if your earnings are below that figure, you pay no USC).
The employee pays Income Tax at 40%, PRSI at 4% and Universal Social Charge (USC) at 5% on the benefit. The Pay As You Earn (PAYE), PRSI and USC for €110 will add 51% to the value: 100% - (40% + 4% + 5%) = 51%. The grossed-up amount is €110 x 100/51 = €215.67.
Self-employed workers aren't paid through PAYE, and they don't have the employment rights and responsibilities of employees. Someone can be both employed and self-employed at the same time, for example if they work for an employer during the day and run their own business in the evenings.
PAYE is HM Revenue and Customs' ( HMRC ) system to collect Income Tax and National Insurance from employment. You do not need to register for PAYE if none of your employees are paid £120 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records.
The Pay As You Earn (PAYE) system is a method of paying income tax and national insurance contributions. You pay tax over the whole year, each time you are paid, rather than paying tax in one lump sum. Your employer is responsible for sending the tax on to HM Revenue and Customs (HMRC).
Income tax when self-employed
| Rate | 2020/21 and 2019/20 |
|---|
| Personal allowance: 0% | £0 to £12,500 you will pay zero income tax on your profits |
| Basic rate: 20% | £12,501-£50,000 you will pay 20% tax on your profits |
| Higher rate: 40% | £50,001-£150,000 you will pay 40% tax on your profits |
There are several places you can find your tax code:
- PAYE Coding Notice, Form P2 – you and your employer get this 'notice of coding' from HMRC in the mail every March.
- Payslips – weekly or monthly, from your employer.
- P60 – your annual tax summary, from your employer.
If the amount that the payroll changes each month is relatively small, to within a pound or two, it is because the tax tables HMRC uses to calculate income tax don't use odd pennies. So monthly deductions do vary slightly.
The €50-60k per year is a minimum salary you have to consider if you want to live in Dublin, Ireland. Obviously, if you plan to live in Dublin alone. In case you are moving with the family including kids, the €50-60k most likely won't be enough.
Revenue carries out spot checks for up to six years, so you'll need to keep your receipts for at least this amount of time.
- Avail of all the tax credits available to you.
- Claim for work expenses.
- Claim for your medical expenses.
- Get a refund on tuition fees.
- Get married.
- Start a pension.
Part of the reason for the big jump in tax for higher earners in Ireland is the Universal Social Charge, which rises to 8 per cent on incomes of more than €70,044. As a rule of thumb, Irish taxpayers pay income tax of 48.5 per cent on salaries in excess of €35,300 and 52 per cent for earnings in excess of €70,044.
How much do you have to earn to pay tax? The ATO advises you will have to pay income tax on every dollar over $18,200 that you earn; earnings below that are tax-free. In addition to the rates in the table above, most taxpayers are also charged a Medicare levy of 2%.
Unless you are making the bare minimum in Ireland, you are obliged to pay tax. For most college students, this will be in the form of income tax – as an employee you will pay PAYE, or Pay As You Earn.
If you are resident and domiciled in Ireland, you will be taxed on your worldwide income. This includes foreign income earned abroad. If you have already paid tax on this income, you may be entitled to claim a credit. The credit is for foreign tax deducted under the terms of a DTA.
Ireland is not a high tax countryWe have one of the highest GDP per capita figures in the world. According to figures from the OECD, Ireland, with a tax burden of just 23.6 per cent in 2015, was behind only Mexico (17.4 per cent) and Chile (20.7 per cent), and was far lower than the OECD average (34.3 per cent).
Ireland is referred to as a tax haven because of the country's taxation and economic policies. Legislation heavily favors the establishment and operation of corporations, and the economic environment is very hospitable for all corporations, especially those invested in research, development, and innovation.
