Almost all income in Ireland is subject to taxation. PAYE is the first type of income tax you should be aware of. This is a tax that your company deducts from your pay on behalf of the state. It is a progressive tax in the sense that the amount of tax you pay is proportional to your income.
This tax is computed at several rates, with the typical cut-off rate of 20% for income up to a specific threshold and a 40% tax rate for income over that point. The prices you pay will be decided by your marital status.
If you work as a single GP in Ireland and make €100,000 per year, you will pay 20% tax on the first €33,800 and 40% tax on the remaining €66,200.
In this case, the typical cut-off rate would be €36,800. Of course, there are additional factors to consider, such as deductions done before calculating your overall PAYE.
The Revenue Commissioners will send you a notice detailing your tax credits and standard rate cut-off rate each tax year. This section explains what tax rate you will pay on your earnings and what credits you have that will help you to lower the amount of tax you will pay.
Several factors influence your cut-off rate, and the amount of tax you pay can be decreased by a variety of factors, including your tax credits. Your tax credits are based on your specific situation. Benefits in kind and non-PAYE income, for example, might reduce your tax credits. There are also several tax reliefs and tax allowances that might help you pay less tax.
Calculating the PAYE tax you'll owe may appear difficult, but it's not brain surgery (though some of you, as physicians, may find the concept of that less intimidating!)
First, remove the following from your income tax calculation:
- Your pension contributions are a set sum deducted from your salary and deposited into your pension plan.
- What you pay into a long-term health-benefits plan.
- This can be up to ten percent of your gross revenue.
- The tax exemptions that you have in place.
- Expenses incurred in the course of performing your duties as a GP.
Then determine your standard rate cut-off point and compute your tax at 20% of your income up to that point and 40% over that point. Then there's the gross PAYE tax rate. After that, subtract your tax credits to determine how much PAYE you'll have to pay.
The Universal Social Charge (USC) is an additional tax on your earnings. This is calculated on the gross amount, before any deductions like pension contributions or PRSI. Unfortunately, in most circumstances, tax credits and tax relief cannot be utilized to lower this sum.
Similar to PAYE, USC is assessed on a cumulative basis. The standard rate of USC is computed as follows as of 2021: the first €12,012 is calculated at 0.5 percent, the following €9,283 is assessed at two percent, and the next €48,749 is calculated at four percent. The remaining amount is estimated to be 8%.
If you start a new employment and the revenue commissioner does not have your most recent tax information, you may be placed on an emergency tax rate until everything is in order.
It's usually a good idea to visit a tax professional before traveling to a new country and starting a new job to help you make the right decision and ensure that all of your data are in order.
For more information on the Irish tax system, visit https://www.revenue.ie/. Or contact us directly and one of our chartered accountants would be happy to advise you.