How to Save €5360 in income tax

How to Save €5360 in income tax

Reducing your tax liability using Standard Rate Cut off Point

Figures used are the 2016 ones.

In Ireland you pay tax at the lower rate of income tax (currently 20%) up to point you exceed your standard rate cut off point after this you pay the higher rate.

Examples

(1)    Single Person their first €33800 of income is taxed at 20% and the balance (anything from €33801 and above) is taxed at 40%.

(2)    Single parent the first €37800 is taxed at lower rate then rest at 40%

(3)    Married couple one income the first €42800 is taxed at 20% then balance at higher 40%

(4)    Married Person two incomes the €42800 is increased by a max of the lower income or €24800. So the maximum at lower rate is €65600 (€37800*2)

Implications and Tax planning to maximise the amount of Income taxed at 20%

(1)    If you are a PAYE worker then there isn’t a whole lot you can do in relation to tax cut off points because you generally can’t split your wages between yourself and our spouse.

(2)    If you are a PAYE worker with the joyous position of having your choice of jobs at different wages rates then the ideal situation to minimise tax is to have one income at €42800 or less and the other at whatever adds up to a balance of €65600. So wife on €40000 then husband on €25600. This allows for all your tax to be at 20%.

(3)     If you are self-employed and earn more than €42800 per year then there are two scenarios

a.       Your spouse works. If he/she is on less than €24800 then you should set up a partnership or employ her in your company and bring her/his income up to €24800 and therefore reduce your taxable income by the same amount.

b.      Your spouse doesn’t work and has no other source of income then you should have him/her as a business partner or company employee. Then split the profits so at least one earns €24800 and the other earns the balance (or indeed any split as long as one is above €24800).

(4)    The Maximum benefit from 3b is for someone earning €65600 or more. If the €65600 is all in one spouses hands then the tax is €42800x20%+€24800x40%= €18480 (less their tax credits). If the income is spread then the full €65600 is taxed at 20% so €65600*.2=€13120. This equates to a saving of €5360 (€18480-€13120). There are also saving in Universal Service Charge which I will analysis in a different article. However there is one bite in the tail in that you lose the Home Carers allowance of €1000 (but still well worth it). It also may not be suitable for some people in certain circumstances such as those on social welfare.

The above is for general information purposes. Each individual case is different and you should get advice from your accountant on all tax planning issues.

© Frank McGivney & Co Ltd (046)9293891  Date written: 22.04.16 

Employee Expenses

Generally speaking it is very difficult for employees to claim expenses in employment to reduce your tax by the Revenue Commissioners. This is because the definition of allowasble expenses is that they have to have been incurred wholly, excusively and necessarily in the performance of the employment and it is virtually impossible to meet these criteria and the revenue will oppose most expenses if not all. So food, clothes , transport to work from home etc are all disallowed.
For most expenses if your employer pays your  expense rather than giving you the money for them then they are taxable through benefit in kind. But for Mobile phone bills, computer equipment and broadband web access where you work from home and private use is just incidental then the Revenue will generally allow these with out been subject to benefit in Kind. Trap: your employer has to pay the bill directly and not give you the money to pay the bill.
You can of course claim Flat rate expenses. these are standard rates of expenses that you can claim which are added to your yearly tax credits and which reduce your income tax liability. The amount of the expense you can claim are based on your profession and on things like if you have to wear and provide a uniform etc. Here is a full list of the flat rate expenses.

Flat Rate Expenses
	2012	2011	2010	2009	2008
	€	€	€	€	€
Agricultural Advisers (employed by Teagasc)	671	671	671	671	671
Archaeologists:  (Civil Service)	127	127	127	127	127
Architects employed by
(a) Civil Service	127	127	127	127	127
(b) Local Authorities	127	127	127	127	127
Airline Cabin Crews	64	64	64	64	64
Bar trade:  Employees	93	93	93	93	93
Building Industry
Bricklayer	175	175	175	175	175
Fitter mechanic, plasterer	103	103	103	103	103
Electrician	153	153	153	153	153
Mason, roofer slater, tiler, floor layer, stone cutter	120	120	120	120	120
Driver, scaffolder, sheeter, steel erector	52	52	52	52	52
Professionals:  engineers, surveyors, etc.	33	33	33	33	33
General operatives (labourers etc. incl. Public Sector)	97	97	97	97	97
Bus, rail and road operatives in
Bus Atha Cliath, Bus Eireann and Iarnod Eireann	160	160	160	160	160
Cardiac Technicians
Female	212	212	212	212	212
Male	107	107	107	107	107
Carpentry and joinery trades
Cabinet makers, Carpenters, Joiners	220	220	220	220	220
Painters, Polishers, Upholsterers, Wood Cutting Machinists	140	140	140	140	140
Civil Service
Architectural Technologists & Assistants	166	166	166	166	166
Clerks of Works (incl. Senior  and District Inspectors)	142	142	142	142	142
Engineering Technicians for Archaeologists, Architects, Engineers and Surveyors	166	166	166	166	166
Park Rangers and constables employed by the Office of Public Works	77	77	77	77	77
Clergymen (Church of Ireland)	127	127	127	127	127
Consultants (hospital)	695	695	695	695	695
Note:  Deduction includes subscription to the Irish Medical Council
Cosmetologists
Obliged to supply and launder their own white uniforms	160	160	160	160	160
Dentists in employment	376	376	376	376	376
Dockers	73	73	73	73	73
Doctors  (hospital, including consultants)	695	695	695	695	695
Note:  Deduction includes subscription to the Irish Medical Council.
Draughtsmen (Local Authority)	133	133	133	133	133
Driving Instructors	125	125	125	125
Note: This amount represents an annual allocation of half the biannual statutory ADI fee payable to the Road Safety Authority
Engineers employed by:
(a)  Civil Service	166	166	166	166	166
(b)  Local Authorities	127	127	127	127	127
(c)  Eircom, Coillte, OPW	166	166	166	166	166
Engineering Industry [and Electrical Industry from 1997/98]
Skilled workers who bear the full cost of own tools and overalls	331	331	331	331	318
Semi-skilled workers who bear the full cost of own tools and overalls	254	254	254	254	244
All unskilled workers and skilled or semi-skilled workers who do not bear the full cost of own tools and overalls	219	219	219	219	210
Firefighters       Full-time	272	272	272	272	272
Firefighters       Part-time	407	407	407	407	407
Fishermen in Employment	318	318	318	318	318
Foresters employed by Coillte	166	166	166	166	166
Freelance actors chargeable to PAYE	750	750	750	750	750
Grooms (Racehorse Training)	294	294	294	294	294
Home Helps (Employed directly or indirectly by Health Boards)	256	256	256	256	256
Hospitals      Domestic Staff:
To include general operatives, porters, drivers, drivers, attendants, domestics, laundry operatives, cooks, catering supervisors, waitresses, catering staff, kitchen porters
(a)  who are responsible for providing and laundering their own uniforms.	353	353	353	353	353
(b) who are obliged to launder       the uniforms supplied	185	185	185	185	185
(c)  whose uniforms are supplied and laundered free	93	93	93	93	93
Hotel industry
Head hall porter	90	90	90	90	90
Hall porter	64	64	64	64	64
Head waiter	127	127	127	127	127
Waiter	97	97	97	97	97
Waitress	64	64	64	64	64
Chef	97	97	97	97	97
Manager	191	191	191	191	191
Assistant Manager	127	127	127	127	127
Trainee Manager	78	78	78	78	78
Kitchen Porter	21	21	21	21	21
Journalists
Journalists, including those in public relations area of journalism	381	381	381	381	381
Journalists who receive expense allowances from their employers	153	153	153	153	153
Local Authorities
Executive Chemists	115	115	115	115	115
Parks Superintendents	40	40	40	40	40
Town Planners	115	115	115	115	115
Mining Industry
(a)miners/shift bosses underground, mill process workers/shift bosses and steam cleaners	1312	1312	1312	1312	1155
(surface workers)	655	655	655	655	576
Motor repair and motor assembly trades
Assembly workers, greasers, storemen and general workers
(a)  who bear the full cost of own tools and overalls	52	52	52	52	52
(b)  who do not bear the full cost of own tools and overalls	42	42	42	42	42
Fitters and mechanics
(a)  who bear the full cost of  own tools and overalls	85	85	85	85	85
(b) who do not bear the full cost of own tools and overalls	42	42	42	42	42
Panel Beaters (See Panel Beaters/Sheet Metal Workers
Nurses:
(a)  where obliged to supply and launder their own uniforms	733	733	733	733	733
(b)  where obliged to supply their own uniforms but laundered free	638	638	638	638	638
(c)  where obliged to launder the uniforms supplied	353	353	353	353	353
(d)  where uniforms are supplied and laundered by hospital	258	258	258	258	258
Nurses:  Short Term Contracts through an Agency.  Additional Amount Due	80	80	80	80	80
Nursing Assistants(including attendants, orderlies and nurses’ aides)
(a)  where obliged to supply and launder their own uniforms	526	526	526	526	526
(b)  where obliged to supply their own uniforms but laundered free	440	440	440	440	440
(c)  where obliged to launder the uniforms supplied	234	234	234	234	234
(d)  where uniforms are supplied and laundered by hospital	93	93	93	93	93
Occupational Therapists
(a)  where obliged to supply and launder their own uniforms	217	217	217	217	217
(b)  where obliged to supply their own uniforms but laundered free	153	153	153	153	153
(c)  where uniforms are supplied and laundered by hospital	52	52	52	52	52
Optometrists/Dispensing Opticians in employment
Optometrists
Registration Fee - once off fee paid initially in year 1	250	250	270	270	260
Retention Fee - payable in 1st year and each subsequent year	285	300	330	330	320
Restoration Fee - payable to re-register with the Opticians Board	270	270	270	270	260
Dispensing Opticians
Registration Fee - once off fee paid initially in year 1	200	200	215	215	210
Retention Fee - payable in 1st year and each subsequent year	225	235	255	255	250
Restoration Fee - payable to re-register with the Opticians Board	215	215	215	215	210
Panel Beaters / Sheet metal Workers
(a)  Who bear full cost of own tools and overalls	78	78	78	78	78
(b)  Who do not bear full cost of own tools and overalls	40	40	40	40	40
Pharmacists	400	400	400	450	450
Pharmaceutical Assistants (formerly known as Assistant Pharmacists)	200	200	200	250	220
NOTE These amounts represent the Annual Retention Fee payable to the PSI
Physiotherapists
(a)  where obliged to supply and launder their own uniforms	381	381	381	381	381
(b)  where obliged to supply their own uniforms but laundered free	318	318	318	318	318
(c)  where uniforms are supplied and laundered by hospital	64	64	64	64	64
Pilots (Airline Pilots Association)	275	275	275	275	275
Plumbing trades
Plumber (non-welder)	177	177	177	177	177
Plumber-welder	205	205	205	205	205
Pipe fitter-welder	205	205	205	205	205
Printing Bookbinding and allied trades
Bookbinders (Hand)	109	109	109	109	109
Bookbinders (Others)	97	97	97	97	97
Compositors, linotype and monotype operators	121	121	121	121	121
Copy Holders, photo lithographers, photo engravers and workers in T and E section of newspapers	114	114	114	114	114
Monotype caster attendants, stereotypes and machine minders	135	135	135	135	135
Readers and revisers	100	100	100	100	100
Rotary machine minders and assistants	150	150	150	150	150
Others (e.g. cutters, dispatchers, rulers, warehousemen)	90	90	90	90	90
Professional Valuers in the Valuation Office	680	680	690	690	690
Radiographers
(a)  where obliged to supply and launder their own white uniforms	242	242	242	242	242
(b)  where obliged to supply their own white uniforms but laundered free	143	143	143	143	143
(c)  where white uniforms are supplied and laundered by hospital	73	73	73	73	73
Respiratory & Pulmonary Function Technicians	191	191	191	191	191
RTE National Symphony Orchestra	2,476	2,476	2,476	2,476	2,476
RTE Concert Orchestra	2,476	2,476	2,476	2,476	2,476
Shipping
British Merchant Navy
Foreign-going trade:
(a)  First class passenger and cargo liners.
Master	318	318	318	318	318
Chief officer, chief engineer, other  officers, including pursers	318	318	318	318	318
Chief steward	318	318	318	318	318
Assistant steward	244	244	244	244	244
Carpenter	194	194	194	194	194
Other ranks	148	148	148	148	148
(b)  Cargo-vessels, tankers, ferries
Master	318	318	318	318	318
Chief officer, chief      engineer, other officers, including pursers	318	318	318	318	318
Chief steward	318	318	318	318	318
Assistant steward	244	244	244	244	244
Carpenter	194	194	194	194	194
Other ranks	148	148	148	148	148
British home or coasting trade:
Master	318	318	318	318	318
Chief officer, chief      engineer, other officers, including pursers	318	318	318	318	318
Chief steward	318	318	318	318	318
Assistant steward	244	244	244	244	244
Carpenter	194	194	194	194	194
Other ranks	148	148	148	148	148
Mercantile marine officers and crews of Irish ships
Foreign-going trade: cargo vessels
Master	98	98	98	98	98
Chief officer, chief engineer, radio officer	90	90	90	90	90
Other officers including pursers	73	73	73	73	73
Chief steward	73	73	73	73	73
Assistant steward	55	55	55	55	55
Carpenter (to include tools)	55	55	55	55	55
Other ranks, including boys	37	37	37	37	37
Home trade:
(a)  Cross channel and continental
Master	98	98	98	98	98
Chief officer, chief engineer, radio officer	90	90	90	90	90
Other officers, including pursers	73	73	73	73	73
Chief steward	73	73	73	73	73
Assistant steward	55	55	55	55	55
Carpenter (to include tools)	55	55	55	55	55
Other ranks including boys	37	37	37	37	37
(b)  Coasting vessels
Master	98	98	98	98	98
Chief officer, chief engineer, radio officer	90	90	90	90	90
Other officers,
including pursers	73	73	73	73	73
Chief steward	73	73	73	73	73
Assistant steward	55	55	55	55	55
Carpenter (to include tools)	55	55	55	55	55
Other ranks, including boys	37	37	37	37	37
Shop Assistants
(including supermarket staff, general shop workers, drapery and footwear assistants)	121	121	121	121	121
Surveyors  employed by:
Local Authorities	127	127	127	127	127
Civil Service	127	127	127	127	127
Coillte	127	127	127	127	127
Teachers
Teachers [excluding guidance counsellors, third-level academic staff and physical education teachers]
School principals	608	608	608	608	608
Other teachers	518	518	518	518	518
Part-time teacher (on full hours)	518	518	518	518	518
Part-time (not on full hours)	279	279	279	279	279
Guidance Counsellors
(a)  employed full-time in second level schools	518	518	518	518	518
(b)  engaged mainly in teaching general subjects but also doing part-time guidance counselling (additional allowance)	126	126	126	126	126
Third level academic staff
Professor, Heads of         Schools/Departments	608	608	608	608	608
Senior lecturer	518	518	518	518	518
College lecturer	518	518	518	518	518
Assistant lecturer	518	518	518	518	518
Part-time lecturer (on full hours)	518	518	518	518	518
Part-time lecturer (not on full hours)	279	279	279	279	279
Physical education teachers
(a)  fully engaged in teaching P.E.	518	518	518	518	518
(b)  engaged mainly in teaching general subjects but also doing part-time P.E. (additional allowance)	126	126	126	126	126
Veterinary Surgeons	337	337	337	337	337
Veterinary Nurses
Where obliged to supply and launder their own uniforms	400
Where obliged to launder the uniforms supplied	150
NOTE: Expenses deductions to be apportioned on a time basis

Frank McGivney & Co. Ltd Chartered Management Accountants fmcgivney@live.com 0469293891