Employees?

What questions do employees ask?

1. What do I need to do when starting work for the first time?
2. What do I need to do to register?
3. What happens next?
4. When do I start paying tax?
5. What do I pay tax on?
6. How are overtime pay, bonuses etc. taxed?
7. Do I pay tax on everything I earn?
8. Holiday work - am I taxable?
9. I am married and ceased employment some years ago. I am about to start a temporary job. What is my tax position?
10. What do I do if I take up a second job?
11. What should I do if I change jobs?
12. What happens when I return to work?
13. What are tax credits?
14. What must I do to get my Certificate of Tax Credits and Standard Rate Cut-Off Point?
15. How do I get the benefit of my Tax Free Credits?
16. What happens if I don’t follow the procedures above?

1. What do I need to do when starting work for the first time

You are about to start working for the first time and you want to know what you must do to sort out your tax.  

The Revenue Commissioners endeavour to make it as easy as possible for you to understand your entitlements and obligations. The following Questions and Answers are designed to give you enough information to get your tax sorted out in time for your first pay cheque.

On the grounds of cost to the employee, FIXMYTAX.com does not handly PAYE queries as the Revenue Commissioners Customer Services section resolves most of the issues arising without charge.

If having read the following material you still have some questions you would like answered, please don’t hesitate to telephone or call to your local Revenue office.

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2. What do I need to do to register?

Your new employer is obliged to deduct tax from your pay under the PAYE system. In order to make sure that your tax is properly dealt with from the start and that your employer deducts the right amount of tax from your pay you are required to do two things:

1. Give your employer your PPS No. (Personal and Public Service Number), formerly your RSI No. Your employer will then let the tax office know that you have started work.
2. Apply for a certificate of tax credits by completing Form 12A (Application for a Certificate of Tax Credits and Standard Rate Cut-Off Point) and sending it to the tax office. Ask your employer to tell you to which district office the completed form 12A should be sent. 

Ideally, you should do all this as soon as you accept an offer of a job - even if it is only part-time or holiday employment. This will give your employer and the tax office time to get things sorted out before your first pay-day.

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3. What happens next?

Your local tax district office will send you a Certificate of Tax Credits and Standard Rate Cut-Off Point, which sets out in detail the amount of tax credits due to you and the standard rate cut off applicable to your income.

The tax office will also send a Certificate of Tax Credits and Standard Rate Cut-Off Point to your employer which shows the total amount of your tax credits.

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4. When do I start to pay income tax?

You will normally start to pay tax from your first pay-day. The amount of tax you pay depends on your level of pay and the amount of your tax credits. If the tax calculated on your pay on any pay-day is less than your tax credits then you don’t pay tax on that pay-day. If the tax on your pay is more than your tax-credits you pay the tax difference in excess of the tax credit.

If you start work in the first week/month of the tax year your employer will deduct one week’s/month’s fraction of your annual tax-free allowances from your first week’s/month’s pay and will deduct tax from the balance.

If you start work in (say) the 27th week of the tax year your employer will calculate your gross tax on your wages, but you will have 27 weeks tax credits to offset against this liability, this will continue till you utilise all your unused tax credits.

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5. What do I pay tax on?

You pay tax on earnings of all kinds arising from your employment such as:

• Basic Pay,
• Commissions,
• bonuses,
• overtime,
• non-cash pay - known as benefit-in-kind e.g. use of company car, tips, Christmas boxes etc.

You do not pay tax on:

• Scholarship income,
• Interest from Savings Certificates,
• Savings Bonds and National Instalment
• Savings Schemes with An Post.
• Payments to approved pension schemes.

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6. How are overtime pay, bonuses etc. taxed?

Your weekly or monthly tax credits are set against your full weekly or monthly pay. If you earn commissions, overtime pay or bonus pay, these amounts are included as part of your pay for that week or month. You do not get any additional tax credits against these additional earnings.

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7. Do I pay tax on everything I earn?

Your weekly or monthly pay is taxed at the standard rate of tax up to your weekly or monthly standard rate cut off point. Any income in excess of your cut off point is taxed at the higher rate of tax. Your weekly or monthly tax credits are offset against this gross tax to give you your tax payable figure.

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8. Holiday work - am I taxable?

Holiday work or part-time work is taxable in the same way as any other employment.

If your gross tax is less than your tax credits, you will not have to pay tax - provided you have applied for a certificate of tax credits. If you have paid tax but you are entitled additional credits you may claim a refund of some or all of the tax paid.

If you paid tax and are returning to school or college you may be able to claim a refund from the tax office of some or all of the tax paid depending on your level of income and unused tax credits.

In order to claim a refund you should ask your local district office for Form P50 (Claim for Tax Repayment during Unemployment) and send it with your form P45 to your tax office. 

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9. I am married and ceased employment some years ago. I am about to start a temporary job. What is my tax position?

The usual provisions on commencing employment will apply. As you possibly won’t hold a form P45, you should contact your local district office immediately so that the amount of your tax credit and standard rate cut-off point can be ascertained and advised to your employer. This will enable your employer to deduct the correct amount of tax. You should also give your employer your PPS No. (formerly your RSI number), if known.

Your spouse is probably utilising all the tax credits due to you as a married couple. If your employment is temporary it may not be worthwhile disturbing his/her tax credits for that year. You are entitled to a PAYE allowance and expenses allowance in your own right provided you qualify for them. These can be set against your income and are not transferable to your spouse. If your spouse is not in receipt of taxable income you can claim all tax credits. Remember, however, that in general Unemployment Benefit and Disability Benefit are taxable sources of income.

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10. What do I do if I take up a second job?

It is even more important to avoid being put on the emergency basis in a situation where you have a job or pension and you take up a second job. Your first employer will already have instructions from your district office to give you all the tax credits to which you are entitled against your pay. Unless you advise the tax office to issue new certificates, one to each employer, dividing the tax credits and standard rate cut-off point between the two jobs, your new employer will operate the emergency basis. This will mean that you would get more tax credits than you are entitled to, resulting in an underpayment of tax, which will have to be paid at the end of the tax year.

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11. What should I do if I change jobs?

Whenever you leave a job you should get a form P45 from your employer. You will need this to give to your new employer. Your new employer will operate PAYE in accordance with the details of tax credits and standard rate-cut off point on the form P45 until he or she receives a Certificate of Tax Credits and Standard Rate Cut-Off Point from the tax office. If you do not give your new employer a form P45, emergency tax will be deducted.

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12. What happens when I return to work?

If you were not in receipt of any income while out of work you should give your P45 to your new employer, or to your last employer if you return to the same job. If you claimed a refund of tax from the tax office during unemployment you will have received a revised P45 from your district office which you should give to your employer.

If you were in receipt of Unemployment Benefit while out of work, you should contact the tax office when you resume employment. Your new employer will be notified of your earnings and tax up to the date you resume employment. The taxable amount of the Unemployment Benefit will be included in the earnings figure.

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13. What are Tax Credits?

Under the tax credit system, every individual is entitled to a set of tax credits depending on their personal circumstances.

Every individual can claim a personal tax credit. PAYE taxpayers can also claim a PAYE tax credit.

Other credits can be claimed upon application.

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14. What must I do to get my Certificate of Tax Credits and Standard Rate Cut-Off Point?

As outlined above, when you start work for the first time, complete form 12A, send it to your district office and you will receive a Certificate of Tax Credits and Standard Rate Cut-Off Point.

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15. How do I get the benefit of my Tax Free Credits?

Your tax credits are given to you for a full tax year. So, whether you start work in the first week of the tax year or six months into the tax year, you still qualify for a full year’s tax credits.

As tax deductions are spread evenly throughout the year under the PAYE system, the total due is divided into 52 weekly/12 monthly amounts, depending on frequency of your pay. Your employer grants these credits against your gross tax to arrive at your tax payable.

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15. What happens if I don’t follow the procedures above?

If your employer does not get either:

• a Certificate of Tax Credits and Standard Rate Cut-Off Point or
• a Form P45 (parts 2 and 3) from an employee

yourhe employer is obliged to deduct tax on the emergency tax when paying your wages or salary. Under the emergency tax, a temporary tax credit is given for the first month of employment but tax deductions are increased progressively from the second month on.

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