Chapter 4 - Key Personal Taxes

Question 1

What is taxation?

Answer 1

Taxation is the taxes and charges collected by the state to pay for things that we all share and need as a country.

Question 2

You need to know about personal taxes and charges because:

Answer 2

They affect everybody’s quality of life
The law states that we have to pay them
They are paid by individual,employees(workers) and all companies
They provide income for the state and we all need the resources that our government spends its income on

Question 3

Resources funded by the government

Answer 3

These resources include infrastructure,roads,parks,schools,hospitals,reservoirs,sewage systems playgrounds,libraries, and swimming pools.

The government must also finance to cost of running these resources.
For example heating and lighting them and the wages to pay doctors,nurses,soldiers,guards,teachers etc.

Question 4

What is work?

Answer 4

Work is anything you do that requires effort

Question 5

What is employment?

Answer 5

Employment is work which you are paid for

Question 6

What is gross pay ?

Answer 6

The total money you earned before any deductions have been made

GROSS PAY =BASIC PAY +OVERTIME+ COMMISSION+ BONUS

Question 7

What is net pay?

Answer 7

Net pay is your take home pay after any deductions have been made.

NET PAY=GROSS PAY -DEDUCTIONS

Question 8

What are statutory deductions?

Answer 8

Statutory deductions are items that are compulsory and that are taken away from your gross pay and given to the government .

Question 9

There are 3 main types of statutory deductions:

Answer 9

Income tax (PAYE)
PRSI
USC

Question 10

What is income tax (PAYE) ?

Answer 10

PAYE (pay as you earn ) is paid on the amount a person earns; it is a percentage of gross income.

PAYE is charged at 20% on the first 33,800 earned - this is called the standard rate of tax.
Anything earned above 33800 is taxed at 40%- thus us called the higher rate of tax.

Question 11

What is PRSI ?

Answer 11

PRSI ( pay related social insurance ) is given to the department of social protection and used to pay social welfare benefits such as Jobseeker’s benefit and state pensions.

PRSI is charged at a rate of 4% of gross income.
People between the age of 16-66 have to pay it.

Question 12

What is USC ?

Answer 12

USC ( universal social charge ) is another tax on income.

The amount of USC you pay increases as your income increases.
If you earn less that €13,000 in a yer you will not pay USC.

Question 13

What are non-statutory deductions ?

Answer 13

Non-statutory deductions are items that are voluntary (you choose to pay them ) and that you agree can be deducted from your gross pay.

Question 14

These are some non-statutory deductions:

Answer 14

Pension schemes
Trade union subscriptions
Health insurance

Question 15

Pension schemes

Answer 15

Pension scheme- you may choose to pay into a private scheme to provide you with a pension income when you retire from employment.

Question 16

Trade union subscriptions

Answer 16

Trade union subscriptions - this is a voluntary fee you pay to a union.
A union is an organisation that aims to help,support and protect workers.

Question 17

Health Insurance

Answer 17

Health insurance- you may choose to pay into a private scheme such as VHI ( voluntary health insurance) or Aviva, to cover you for healthcare

Question 18

Tax rates

Answer 18

Tax is charged as a percentage ( %) .

Different rates may apply to different levels or bands of income.

Question 19

What are tax credits ?

Answer 19

Tax credits decrease the tax you pay.
Everyone receives a personal tax credit ( 1,650) and an employee tax credit (1,650 ) which amounts to 3300 .

This means that if you do not earn more than 16,500 you wont pay any tax.

Question 20

Tax on savings

Answer 20

Another form of income can be the interest earned on savings, which may also be taxed.

The tax that applies is DIRT ( deposit interest retention tax ).
The rate of DIRT in 2016 was 41%

Question 21

Tax Credit Certificate -When you are working your employer must deduct tax from your pay under the PAYE system to ensure that your tax properly dealt with from the start and that your employer deducts the right amount of tax from your pay you should do two things:

Answer 21

1. Give your employer your PPS (personal public service number ) number.
2. Apply for a tax credit certificate

Question 22

Tax allowances

Answer 22

Tax allowances can also reduce the amount of tax you pay.
It is deducted from your gross pay before it is taxed.

You multiply th amount of tax reduction by the rate of tax %%%%

Question 23

Other taxes

Answer 23

Companies have to pay CORPORATION TAX, which is a tax on their profits .

When we buy goods and services we are often paying VAT ( value added tax )

Custom duties are a tax on imported goods ( brought into Ireland)

Excise duty is a tax on some home produced goods .

Owners of property must pay PROPERTY TAX. The rate depends on the value of your property.