The basic method for calculating Income Tax on pay is as follows
- Apply the standard rate of tax (20%) on their gross pay up to their weekly cut-off point
- Apply the higher rate of tax (40%) on any gross pay above their weekly cut-off point
- Add the two amounts above
- Subtract the amount of their weekly tax credits
- If you pay your employees fortnightly or monthly, the same principles apply
- The cut-off points are shown on the employees RPN
Example 1
Mark is your employee. The RPN you have received for Mark provides the following details:
| Yearly | Monthly | Weekly | |
| Tax credits | €3,750.00 | €312.50 | €72.12 |
| Cut-off point | €42,000.00 | €3,500.00 | €807.69 |
Mark is single and earns €900 per week
|
|
Income | Tax | Explanation |
| Tax at 20% | €807.69 | €161.54 | Apply the standard rate of 20% up to the limit of the cut-off point (€807.69) on the RPN. |
| Tax at 40% | €92.31 | €36.92 | Apply the higher rate of 40% to remainder of any gross pay above cut-off point (€900 – €807.69). |
| Gross tax | €198.46 | Add the amount of tax at the standard rate to the amount of tax at the higher rate. | |
| Less tax credits | (€72.12) | Take away the tax credits as shown on the RPN. | |
| Tax payable | €126.35 | Net tax payable. |
This example does not take account of the income tax week or Mark’s previous income.
You can use this worksheet to calculate your tax payable
To calculate Emergency tax where you have received a PPSN from the employee
| Weeks of employment | Tax credit | Cut-off point | Tax rate |
| Weeks 1 to 4 | No tax credit | €807.69 | Standard Rate (20%) |
| Weeks 5 to 8 | No tax credit | No cut off point | Higher Rate (40%) |
To Calculate Emergency Tax where you have not received a PPSN
| Weeks of employment | Tax credit | Cut-off point | Tax rate |
| All | No tax credit | No cut off point | Higher Rate (40%) |
If you need any further information please email primary@fssu.ie or phone (01) 9104020.