Harneet's Blog

Individuals with total income less than 13,000 do not pay USC.

In addition the following types of income are not subject to USC.

1. Social protection benefits, pensions and similar payments.
2. Deposit interests
3. Dividends paid by credit unions to their members.
4. Returns from life insurance and collective investment fund investments.
5. The tax free part of ex-gratia redundancy payments paid by employers.

Where is income is taxed under the PAYE system, the USC is applied to the gross income, before deduction of pension contributions, reliefs, tax credits etc.

Paying income tax

There are two main ways in which income tax is paid:

1. Under PAYE system in respect of income and benefits arising from an employment and taxed under Schedule E.

Employers receive a Certificate of Tax credits and standard rate cut off point from Revenue in respect of each employee, this certificate tells the employer when operating PAYE.

• The amount of income during the payroll period, ex – a week or month to be taxed at standard rate, this is the standard rate, this is the standard rate cut off point. Any income received in the period above this amount is subject to income tax at the higher rate of 40%.
• The amount of tax credit to be allowed against this tax liability during this period, the balance is the amount of tax to be deducted for that period.

2. Under the self assessment system, where the tax payer is obliged to calculate their own income tax and USC liability and pay over the tax due in one lump sum to Revenue each year no later than 31st October of that year (or typically mid-november if paying and filing tax using the ROS system).

Everyone is subject to self assessment for income tax with the following exceptions:

• Persons whose total income for the year of assessment is dealt with under the PAYE system or where there is other non PAYE income of less than 5,000 per annum which is fully coded in to their certificate of tax credit and standard rate cut off point and tax on such income is recovered though the PAYE system.
• Anyone who has received a notice from revenue exempting him/her from making a return.
• A person who is only liable to income tax in respect of tax withheld on annual payments.

The main groups liable to self assessment are thereof:

Most proprietary directors

The self employed

Employees who have non-PAYE gross investment income of more than 5000 per annum for example rental and/or gross investment income.

A self employed person will usually make up their accounts for a 12-month period called an accounting period which is usually any continuous 12-month period.

A self employed individual is usually assessed for income tax in a year on the profits of the accounting period ending in that tax year. Ex – if a doctor accounting period ends on may 31st then his accounts for the year ending mya 31st 2024 would form the basis calculating his/her taxable income for the year 2023 tax year.

Individuals subject to self assessment pay a lump sum income tax payment each year before october 31st of that particular year, this payment is referred as Preliminary income tax year, as it is an advance or preliminary payment of income tax due for that tax year in question under the self assessment system. The final liability may not be known until after the end of the tax year in question. At the same time , they make a final tax (Balance of tax) payment for the previous year and file a return of income.

• Preliminary income tax and USC for the year 2024 tax year must be paid october 31st 2024(or later on a date specified by Revenue in november 2024 if paying and filing ROS).
• The return of income for the 2023 tax year must be made by october 31st 2024 (or on the ROS deadline date in november 2024 if paying and filing using ROS).
• The balance of any income tax and USC due for 2023 tax year must be paid by October 31st 2024.(or later in november 2024 if paying and filing using ROS).
• The return of income for the 2024 tax year must be made to revenue by october 31st 2025(or on the ROS deadline date in november, if paying and filing using ROS).

In order to avoid interest and penalties subsequently becoming payable if the final tax liability owed for the year turns out to be more than the preliminary tax paid, the tax payer must normally pay preliminary income tax of atleast:

1. 90% of the actual final tax liability for the current tax year, as ascertained when the year has finished.
2. 100% of the tax liability of the previous tax year.
3. 105% of pre-preceding tax year, where preliminary income tax is paid in installments by regular direct debit.

Signing off !

Harneet K