FAQ - Starting Work

1. I am about to start working for the first time and I want to know what I must do to sort out my tax. Where can I get some basic information that will tell me what I need to know?
2. What do I need to do?
3. What happens next?
4. When do I start to pay income 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 are Tax Credits?
11. What must I do to get my Tax Credits?
12. How do I get the benefit of my Tax Credits?
13. What happens if I don’t follow the procedures above?
14. What do I do if I take up a second job?
15. What should I do if I change jobs?
16. Am I entitled to repayment of tax if I become unemployed?
17. If I am in receipt of Unemployment Benefit while unemployed how will this affect my claim for a tax refund?
18. What happens if I am in receipt of short-term Disability Benefit and not in employment?
19. What happens if I am in receipt of short-term Disability Benefit while still in employment?
20. What happens when I return to work?
21. Important notes : PPS NUMBER (formerly RSI Number) FORM P60 FORM P45

The Revenue will have pleasure in, welcoming you to the tax system.

The Revenue will try 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.

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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Your new employer must deduct tax from your pay under the PAYE system.

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 should do two things:

• Give your employer your PPS No. (Personal and Public Service Number), formerly your RSI No. He/she will then let the tax office know that you have started work.
• 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 for a form 12A. Your employer will tell you to which tax office the completed form 12A should be sent. If your employer does not have a form 12A, you can get one from any tax office or telephone 1890 306706.

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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The tax 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. 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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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 your pay on any pay-day is less than your tax-free allowances then you don’t pay tax on that pay-day. If your pay is more than your tax-free allowances you pay tax on the difference.

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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You pay tax on earnings of all kinds arising from your employment including 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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Your weekly/monthly tax credits are set against your full weekly/monthly pay. If you earn overtime or bonus pay etc., 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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Your weekly/monthly wage is taxed at the standard rate of tax up to your weekly/monthly cut off point; any income in excess of your cut off point is taxed at the higher rate of tax. Your weekly/monthly tax credits are offset against this gross tax to give you your tax payable figure.

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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. To claim a
refund you should ask the tax office for Form P50 (First Claim for Tax
Repayment during Unemployment) and send it with your form P45 to your tax office.

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The usual provisions on commencing employment will apply. As you
possibly won’t hold a form P45, you should contact the tax 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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Under the tax credit system every individual is entitled to tax credits
depending on personal circumstances. Every individual can claim a
personal tax credit. PAYE taxpayers can also claim a PAYE tax credit.

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

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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 pay. Your employer grants these credits against your gross tax to arrive at your tax payable.

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If an employer does not get either a:

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

He/she is obliged to deduct tax on the emergency basis when paying an employee’s wages or salary. Under the emergency basis, 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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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 the tax 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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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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If you remain unemployed for four weeks you can claim a refund from the tax office of tax paid, by using the four weeks unused tax credit. You can do this every four weeks until all tax has been repaid or the tax credits are used. You cannot carry unused tax credits forward from one tax year to the next.

If emergency tax was deducted from you, you may apply immediately for a refund on becoming unemployed.

To claim a refund you should ask the tax office for Form P50 (First
Claim for Tax Repayment during Unemployment) and send it with your form P45 to your tax office. See also - I am unemployed - can I claim a refund of tax?

If you have not paid tax, you cannot claim a refund on becoming unemployed.

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Unemployment Benefit is a taxable source of income. However, any child dependent element and the first €12.70 per week of benefit are exempt from tax. When you make a claim for a tax refund the taxable portion of the Unemployment Benefit will be added to your pay and the appropriate refund, if any, will be made. You should note that if the weekly amount of your Unemployment Benefit exceeds your weekly tax credit you will not be entitled to a refund.

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Disability Benefit and short-term Occupational Injury Benefit are
taxable sources of income. However, the child dependent element of the benefit is exempt from tax. If you make a claim for a tax refund while out of work, the taxable portion of the Disability Benefit will be added to your pay and the appropriate refund, if any, will be made.

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If you are absent from work due to illness and receive Disability
Benefit, your employer will take the necessary steps to ensure that the
taxable portion of the benefit is taxed.

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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 the tax 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.

If you were in receipt of Disability Benefit and return to work with a
different employer you should contact the tax office.

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PPS Number (Personal Public Service) Number

The Tax Office and the Department of Social & Family Affairs use a
unique identifying number for each person. This number is called a PPS number. It generally contains seven digits and one letter.

Your PPS number is very important and you should keep a permanent record of it.

The Department of Social & Family Affairs will have notified you of your PPS number, if you are aged sixteen or over. This is your number for tax purposes also.

Always quote your PPS number when writing or calling to the tax office or the Social Welfare Office. This will avoid unnecessary delay and ensure that you get a speedier service.

Form P60

At the end of each tax year your employer must give you a certificate of pay and of the tax and PRSI deducted by him or her during the year. This certificate is called a form P60 and comes in two parts. It is your record of:

• the pay you received from your employer
• the tax deducted under PAYE and
• the PRSI contributions deducted.

If your liability to tax for any year needs to be reviewed, you will
need to send one part of the form P60 to the tax office. You would send a second part to the Social Welfare Office as evidence that you have paid PRSI contributions, if you need to claim a benefit.

Form P60 is an important document so be sure to keep it safely.

Form P45

Form P45 is a certificate given by your employer, when you leave
employment, that he or she has correctly deducted tax and PRSI from your pay in accordance with the instructions given by the tax office.

Form P45 shows:

• Gross pay to date of leaving
• Tax deducted to date of leaving
• PRSI deducted to date of leaving and number of insurable weeks
• The tax credits, standard rate cut-off point and tax table in
  operation.

Form P45 is a very important document and is needed for:

• Refund of tax during unemployment Claiming Social Welfare
• benefits To give to your new employer in order to avoid emergency tax.

IF YOU DO NOT GET A FORM P45 WHEN LEAVING, ASK FOR IT.

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