KEY PERSONAL TAXES1.4

Textbook pp. 48-64

Links: 1.11, 1.12, 3.4, 3.5, 3.10, 3.11

Explain key personal taxes and charges and suggest the occasions when and why they might arise.

Pick out four large words from this word cloud and explain them in relation to this unit.

1. ____________________________________________________________________________________________

2. ____________________________________________________________________________________________

3. ____________________________________________________________________________________________

4. ____________________________________________________________________________________________

Discuss what these words tell you about this unit. Are there any small words that you are surprised to see? Why?

Before After

Yes I agree No I disagree Statement Yes I agree No I disagree

Taxation is compulsory by law

Non-statutory deductions are payable by law

Your PPS number has nine letters

USC increases income

PAYE is a tax

BEFORE WE BEGINDo this exercise individually or in pairs. Tick ü whether you agree or disagree with the statements. Revisit it after the unit to see if you have changed your mind about any of them.

Key Words

26

Tax – Taxes and charges collected by the state to pay for things for the country.

Income – There is a tax on income called PAYE.

Deductions – Are taken away from pay e.g. income tax.

Gross – Gross pay is income before deductions.

27

KEY PERSONAL TAXES 1.4

Read the following statements. Tick ü whether you believe them to be true or false.

Statement True False

GAA lotto winnings are regular income

Gross pay is take-home pay

Voluntary deductions are payable by law

UCH is a non-statutory deduction

PAYE is a form of tax

Net pay is sometimes greater than gross pay

USC = Universal Social Change

Statutory deductions are not payable by law

Union fees are non-statutory deductions

PRSI = Pay Related Society Insurance

QUESTIONS 1. Complete this sentence by filling in the missing words.

Taxation is the taxes and charges collected by the s____________ to pay for things that we all share and

need as a c__________________ .

2. Why is tax necessary?

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

True or False?

• Affectseveryone’squalityoflife.

• Incomeforthestatewhichisthenusedtopayforcapitalandcurrentexpenditure.

• Providesessentialservicesforthepeopleofthecountrye.g.educationandhealthcare.

• Taxescollectedpayswages/salariesforgovernmentworkerse.g.teachersandnurses.

üü

üü

üü

ü

ü

ü

ü

tate

ountry

28

BE BUSINESS WORKBOOK: PERSONAL FINANCE1.4

3. Compose a tweet from the ‘Be Business’ account in response to Dermot.

Dermot @14PF@bebusiness Is gross pay before or after tax?@14PF

1:05 PM - 10 Dec 17

Follow

4. Complete the following definitions by filling in the missing words.

Gross pay = B____________ pay + overtime + commission + bonus

Net pay = Gross pay – d___________________________

5. What do the following letters stand for?

PAYE

USC

PRSI

PPS

DIRT

6. Name two statutory deductions.

_________________________________________________________________________________________________

_________________________________________________________________________________________________

7. Name two non-statutory deductions.

_________________________________________________________________________________________________

_________________________________________________________________________________________________

Pay as you earn

UniversalSocialCharge

PayRelatedSocialInsurance

PayrollPersonellSystem

DepositInterestRetentionSystem

Hi Dermot,Grosspayisbeforetaxandbeforeanydeductionshavebeenmade.

asic

eductions

PAYEandPRSI

Pension scheme and trade union subscriptions.

29

KEY PERSONAL TAXES 1.4

8. Marian Walsh works for Mus4U. She earns €400 a week. Her income tax is 20%.

a) Calculate Marian’s net pay.

€

Gross Pay

Income Tax

Net Pay

Remember that tax credits reduce tax.

b) Marian’s tax credit is €30 per week. Calculate her net pay based on the information given above.

€ €

Gross Pay

Income Tax (20% of €400)

Less Tax Credit

Taxation Payable

Net Pay

PAYE has two different rates. The standard rate is 20% of the first €33,800 earned annually, therefore weekly = €33,800/52 = €650. The higher rate is charged at 40% on all income earned weekly over €650. (This may change after our budgets have been prepared.)

c) Marian has received a promotion and a pay rise and now earns €850 a week. Her PAYE tax is 20% on the first €650 she earns weekly and 40% on the remainder. Marian’s tax credit is €40 per week. Calculate her net pay.

€ €

Gross Pay

Income Tax (20% of €650)

40% of Remainder (€850 – €650) = €200

Less Tax Credit

Taxation Payable

Net Pay

9. Gerry Madden works for HealthyU. He earns €900 a week. His PAYE tax is 20% on the first €650 and 40% on the remainder. Gerry’s tax credit is €40 per week. Calculate his net pay.

€ €

Gross Pay

Net Pay

Income tax (20% of €650)40% of remainder (900 - 650) = 250Less tax credit

130

100

(40)

130

80

(40)

80

(30)

900

190

710

850

170

680

400

50

350

400

80

320

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BE BUSINESS WORKBOOK: PERSONAL FINANCE1.4

10. Margaret O’Shea works for Arty Crafts Ltd, a private limited company. Margaret earns €52,000 a year. Her PAYE tax is 20% on the first €650 she earns a week and 40% on the remainder. Her tax credit is €40 per week. Calculate Margaret’s weekly net pay.

€ €

Gross Pay

Gross Weekly Pay

Income Tax (20% of €650)

40% of Remainder

Less Tax Credit

Taxation Payable

Net Pay

11. David Doran earns €40,000 a year. His PAYE tax is 20% on the first €650 he earns in a week and 40% on the remainder. David’s tax credit is €30 per week. Calculate his weekly net pay.

€ €

Gross Pay (weekly)

Income Tax

20% of €650

40% of Remainder

Less Tax Credit

Taxation Payable

Net Pay

12. Fill in the Total and Net Pay on the following wage slip.

Name Period Gross Pay Deductions Net Pay

(Week 1) Basic Overtime Total PAYE PRSI USC Savings VHI

Martina Waldron

01/01/2018– 07/01/2018

€700 €150 €110 €28 €25 €54 €10.34

13. Jamie Fitzgerald worked 38 hours at €25 per hour and five hours overtime paid at double time. Jamie’s deductions are: PAYE €96, PRSI €35, USC €32; union fees €8 and VHI €22.

a) Complete Jamie’s wage slip.

Name Period Gross Pay Deductions Net Pay

Basic Overtime Total PAYE PRSI USC Savings VHI

b) What was Jamie’s gross pay?

_________________________________________________________________________________________________

130

140

(40)

130

47.69

(30)

€622.66

€1,007

€850

€1,200 €96 €35 €32 €8 €22€250€950(week 1)01/01/2018-07/01/2018

Jamie Fitzgerald

52,000

1,000

230

770

769.23

147.69

621.54

(1,000 - 650) = €350

(769.23 - 650) = €119.23

€1,200

31

KEY PERSONAL TAXES 1.4

c) What were Jamie’s total deductions?

_________________________________________________________________________________________________

d) What was Jamie’s net pay?

_________________________________________________________________________________________________

e) Name two statutory deductions for Jamie.

_________________________________________________________________________________________________

f) Name a non-statutory deduction for Jamie.

_________________________________________________________________________________________________

14. Tax is always charged as a percentage (%) of income.

What are the current rates for PAYE?

20__ Standard Rate Higher Rate

Single person 20% 40%

First €

15. What are the current rates of the Universal Social Charge (USC)?

Gross Income USC Rate Amount of USC to pay if you earn the full amount

Up to % €

Up to % €

Up to % €

Above % €

Remember that tax rates for a married person are different.

See www.revenue.ie for up-to-date taxation information

€193

€1,007

PAYE,PRSI

VHI

16

38,800 Remainder

€12,012

€18,668

€70,044

€70,044.01

1

3

5.5

8

€120.12

€199.68

€2,825.68

Depends on how much you earn.

32

BE BUSINESS WORKBOOK: PERSONAL FINANCE1.4

16. What is a PPS Number used for?

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

17. Overtime is usually paid at a higher rate than the normal working rate. Why might that be?

_________________________________________________________________________________________________

_________________________________________________________________________________________________

18. Sales people are often paid on a commission system. Why?

_________________________________________________________________________________________________

_________________________________________________________________________________________________

19. Are there any disadvantages for the employee of being paid on a commission basis?

_________________________________________________________________________________________________

_________________________________________________________________________________________________

20. Study the following carefully and note the information provided. Fill in the missing figures.

Employee no 6666

Employee name:

Philip Byrne

DatePay period Week 2

Nox10PPS No1234567SH

PRSI Class

Payments Deductions

Basic wage €2000.00 PAYE PRSI USC Pension

€520.00 €60.00 €100.00 €60.00

Total €2000.00 Total deductions Net pay

Remember that net pay is your take-home pay.

Thisisauniquereferencenumberthathelpsyouaccesssocialwelfarebenefits,publicservicesand

information in Ireland.

Asovertimeisadditionalhoursworkedoveraperson’snormalworkingtime,itispaidatahigherrate.

To encourage the employees to sell more. The more they sell, the more commission they make.

Ifnosalesaremadetheemployeemightreceivenoincomeoronlyabasicincome.

€740.00 €1,260.00

33

KEY PERSONAL TAXES 1.4

21. Complete this crossword.

15

4 5 6

2

1

3

8 109

11

13

14

16 17

18

19

7

12

Across 2. A duty/tax on imported goods (goods

brought into Ireland from abroad) (7)

4. Income tax Pay As You Earn (4)

8. Income on savings or the cost of borrowing (8)

11. Universal Social Charge (3)

12. When your account balance is a minus figure, your account is over______________.

13. Putting your money/savings into products or schemes that should make a profit (income) (11)

14. ______________ tax is tax on companies’ profits (11)

18. Deductions that are compulsory (you must pay them) (9)

19. It allows you to withdraw more money (a limit will be set in advance) than you have in your bank account (9)

Down 1. A tax on goods and services (3)

3. Long-term loan used to buy a house – typically for 20 to 30 years, they are provided by financial institutions (8)

5. A duty/tax on some home-produced goods (6)

6. Property or other assets, which the lender can take if you fail to repay the loan (10)

7. Good track record of paying back other loans and of being a regular saver (12)

9. Deductions that are voluntary (you choose to pay them), e.g. health insurance (12)

10. Money invested in a company, receive dividend part of profits (6)

15. Taxation is normally expressed in a

_______________________________________ (10)

16. Given to the Department of Social Protection and used to pay social welfare benefits and pensions (4)

17. Tax on interest earned on savings (4)

P A Y E C

E

R A W

CRE

C U S TAV

O M S

I NONSTATUTORY

T E RTGAGE

E SHARES

TU S C

X

I N V ESI

S TALLO

M E N TID

S

C O R P O R A T I ORTHY

WN

SRP

T A TNECR

U T O RID

Y

LAE

O V EGA

R D R A F T

I T

O

34

BE BUSINESS WORKBOOK: PERSONAL FINANCE1.4

Explain these key terms.

Taxation

Gross pay

Net pay

Statutory deductions

Non-statutory deductions

Union subscriptions

Wage slip

Tax rates

Tax credits

Tax allowances

Revenue commissioners

Corporation tax

VAT

Customs duties

Excise duty

Property tax

Are you ready to go on to the next unit?

1.4 Read the Learning Outcome Getting ready Revisited Got it!

Reflect on your learning:

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

Looking Back

Moving On

Now revisit the ‘Before We Begin’ exercise.

The taxes and charges collected by the state to pay for things that we all need as a country.Totalmoneyearnedbeforeanydeductionshavebeenmade.

Take-homepayafterdeductionshavebeenmade.

Compulsorydeductionsfrompay.

Deductionsfrompaythatarevoluntary.

Fee paid for membership of a trade union.

Givesdetailsofgrosspay,deductionsandnetpay.

Reducestheamountoftaxyouhavetopay.

Reducestheamountoftaxyouhavetopay.Takenfromgrosspay.

StatebodyresponsibleforcollectingtaxesinIreland.

Taxonacompany’sprofits.

Value-addedtax.Ataxongoodsandservices.

Differentratesapplytodifferentlevelsofincome.

Taxes on imported goods.

Tax on home produced goods.

Tax on your own property.

35

KEY PERSONAL TAXES 1.4

Key Check 1. What skills have you developed while studying this topic?

_____________________________________________________________________________________________

_____________________________________________________________________________________________

2. What new technology have you used in this topic (useful websites/YouTube clips/tweets)?

_____________________________________________________________________________________________

_____________________________________________________________________________________________

3. What research have you done? Did you use a trustworthy source? Has it dated?

_____________________________________________________________________________________________

_____________________________________________________________________________________________

4. What new information have you discovered?

_____________________________________________________________________________________________

_____________________________________________________________________________________________

5. How has the learning influenced your thoughts, opinions, attitudes and behaviour?

_____________________________________________________________________________________________

_____________________________________________________________________________________________

6. How might the learning influence your future?

_____________________________________________________________________________________________

_____________________________________________________________________________________________

7. What values have you encountered in this unit?

_____________________________________________________________________________________________

_____________________________________________________________________________________________

8. What decisions have you made in this unit?

_____________________________________________________________________________________________

_____________________________________________________________________________________________