Employee Pay Day – Calculating Tax Due
- Applying tax credits and standard rate cut-off point
- Weekly pay
- Fortnightly pay
- Four-weekly pay
- Monthly pay
- Twice-monthly pay
- Quarterly pay
- Half-yearly pay
- Yearly pay
- Payments at irregular intervals (continuous employment)
- Payments made other than on the employee's regular pay day
- Deduction of tax from "holiday pay"
- Emoluments earned before 1 January but paid on or after that date
1. Applying tax credits and standard rate cut-off point
Under the tax credit system an employee is entitled to tax credits and a standard rate cut-off point depending on personal circumstances e.g. married person's credit, employee PAYE tax credit, married or single or widowed standard rate cut-off point, etc.
Tax must be deducted or refunded in accordance with the tax credits and standard rate cut-off point due and the tax rate applicable at the time the payment is made. This is so even if all or part of it was earned or treated as earned in a previous or coming income tax year.
An employee's tax credits and standard rate cut-off point are given on the tax credit certificate or tax deduction card. These documents will indicate whether the tax credits and standard rate cut-off point are to be given on a cumulative basis or on a week 1/month 1 basis. If there is no tax credit certificate, the temporary basis (Employer's PAYE records part 9.1 and Calculation of tax under PAYE system part 7) or emergency basis (Employer's PAYE records part 9.2 and Calculation of tax under the PAYE system parts 8 and 9) will apply.
2. Weekly pay
(See Weekly and monthly income tax calendars for the income tax calendar)
For the purpose of these instructions weekly pay should be regarded as paid on the same weekday throughout the year. For example, where the normal pay day is on a Friday but one pay day is changed to the previous Thursday, the following day (Friday) should still be regarded as the pay day for the purpose of determining the income tax week.
The following tax credits and standard rate cut-off point are to be set against pay:
If cumulative basis applies
The cumulative tax credits and standard rate cut-off point up to and including the income tax week in which the pay day falls.
If week 1 basis applies
The amount of the weekly tax credit and standard rate cut-off point as shown on the tax credit certificate. Where the employer uses a tax deduction card the tax credit and standard rate cut-off point will be printed on the line relating to the income tax week in which the pay day falls.
If temporary basis applies
The amount of the weekly tax credit and standard rate cut-off point as shown on the form P45.
If emergency basis applies
See Calculation of tax under the PAYE system parts 8 and 9
Week 53
If there are 53 weekly pay days in the income tax year (normally this occurs where 31 December, or in a leap year, 30 or 31 December, is a pay day), see Employer's duties at the end of the income tax year part 2 regarding tax deductions in this situation.
3. Fortnightly pay
For the purpose of these instructions, fortnightly pay should be regarded as paid on the same weekday throughout the year. For example,where the normal pay day is on every second Friday but one pay day is changed to the previous Thursday, the following day (Friday) should still be regarded as the pay day for the purpose of determining the income tax week.
The following tax credits and standard rate cut-off point are to be set against pay:
If cumulative basis applies
| Income tax week in which payment is made | Cumulative tax credits and standard rate cut-off point at week no. |
|---|---|
| 1 or 2 | 2 |
| 3 or 4 | 4 |
| 5 or 6 | 6 |
| 7 or 8 | 8 |
| 9 or 10 | 10 |
| 11 or 12 | 12 |
| 13 or 14 | 14 |
| 15 or 16 | 16 |
| 17 or 18 | 18 |
| 19 or 20 | 20 |
| 21 or 22 | 22 |
| 23 or 24 | 24 |
| 25 or 26 | 26 |
| 27 or 28 | 28 |
| 29 or 30 | 30 |
| 31 or 32 | 32 |
| 33 or 34 | 34 |
| 35 or 36 | 36 |
| 37 or 38 | 38 |
| 39 or 40 | 40 |
| 41 or 42 | 42 |
| 43 or 44 | 44 |
| 45 or 46 | 46 |
| 47 or 48 | 48 |
| 49 or 50 | 50 |
| 51 or 52 | 52 |
(If the tax credits and standard rate cut-off point at week 1 were set against a fortnightly payment made in this week the employee would get only one week's credits and standard rate cut-off point against two week's pay and at the end of 52 weeks would have had only fifty-one week's tax credits and standard rate cutoff point set against fifty-two week's pay).
If week 1 basis applies
Twice the amount of the weekly tax credits and standard rate cut-off point as shown on the tax credit certificate. (This includes the case where fortnightly pay is paid in week 1).
If temporary basis applies
Twice the amount of the weekly tax credits and standard rate cut-off point as shown on the form P45. (This includes the case where fortnightly pay is paid in week 1).
If emergency basis applies
See Calculation of tax under the PAYE system parts 8 and 9
Fortnight 27
Normally there will be 26 fortnightly pay days in the year. If there are 27 fortnightly pay days in the year (where 31 December or in a leap year, 30 or 31 December, is a pay day), see Employer's duties at the end of the income tax year part 2 regarding tax deductions in this situation.
4. Four-weekly pay
The following tax credits and standard rate cut-off point are to be set against pay:
If cumulative basis applies
| Income tax week in which payment is made | Cumulative tax credits and standard rate cut-off point at week no. |
|---|---|
| 1 - 4 inclusive | 4 |
| 5 - 8 inclusive | 8 |
| 9 - 12 inclusive | 12 |
| 13 - 16 inclusive | 16 |
| 17 - 20 inclusive | 20 |
| 21 - 24 inclusive | 24 |
| 25 - 28 inclusive | 28 |
| 29 - 32 inclusive | 32 |
| 33 - 36 inclusive | 36 |
| 37 - 40 inclusive | 40 |
| 41 - 44 inclusive | 44 |
| 45 - 48 inclusive | 48 |
| 49 - 52 inclusive | 52 |
If week 1 basis applies
Four times the amount of the weekly tax credit and standard rate cut-off point as shown on the tax credit certificate (irrespective of the week in which the payment is made).
If temporary basis applies
Four times the amount of the weekly tax credit and standard rate cut-off point as shown on the form P45 (irrespective of the week in which the payment is made).
If emergency basis applies
See Calculation of tax under the PAYE system parts 8 and 9
Week 53
See paragraph Employer's duties at the end of the income tax year part 2 regarding a four-weekly payment made in week 53.
5. Monthly pay
The following tax credits and standard rate cut-off point are to be set against pay:
| Month no. | Month ended |
|---|---|
| 1 | 31 Jan |
| 2 | 28/29 Feb |
| 3 | 31 Mar |
| 4 | 30 Apr |
| 5 | 31 May |
| 6 | 30 Jun |
| 7 | 31 July |
| 8 | 31 Aug |
| 9 | 30 Sept |
| 10 | 31 Oct |
| 11 | 30 Nov |
| 12 | 31 Dec |
If cumulative basis applies
The cumulative tax credits and standard rate cut-off point up to and including the income tax month in which the pay day falls.
If month 1 basis applies
The amount of the monthly tax credits and standard rate cut-off point as shown on the tax credit certificate.
If temporary basis applies
The amount of the monthly tax credit and standard rate cut-off point as shown on the form P45. See New employees and employees recommencing part 12 regarding an employee's change from monthly to weekly pay or weekly to monthly pay following a change of employment.
If emergency basis applies
See Calculation of tax under the PAYE system parts 8 and 9
6. Twice-monthly pay
The following tax credits and standard rate cut-off point are to be set against pay:
If cumulative basis applies
The amounts of cumulative tax credits and standard rate cut-off point to be set against the payment made at the end of the month are the cumulative tax credits and standard rate cut-off point figures for the income tax month in which the payment is made.
Mid-month payments
The amounts to be set against a mid-month payment made in January are half of the tax credits and standard rate cut-off point for month 1. The amounts to be set against a mid-month payment made in any other month are half of the monthly tax credits and standard rate cut-off point figures plus the cumulative tax credits and standard rate cut-off point for the income tax month immediately before the payment is made.
Example
For a pay day falling in mid-August - allow cumulative tax credits and standard rate cut-off point for July plus half of the monthly tax credits and standard rate cut-off point figure for August.
If month 1 basis applies
Half of the monthly tax credits and standard rate cut off point figure as shown on the certificate.
If temporary basis applies
Half of the monthly tax credits and standard rate cut-off point figure as shown on the form P45.
If emergency basis applies
7. Quarterly pay
The following tax credits and standard rate cut-off point are to be set against pay:
If cumulative basis applies
| Payments made between: | Cumulative tax credits and standard rate cut-off point due at: |
|---|---|
| 1 January - 31 March (inclusive) | Month 3 |
| 1 April - 30 June (inclusive) | Month 6 |
| 1 July - 30 September (inclusive) | Month 9 |
| 1 October - 31 December (inclusive) | Month 12 |
If month 1 basis applies
One quarter of the yearly tax credits and standard rate cut-off point figures as shown on the tax credit certificate.
If temporary basis applies
Three times the monthly (or 13 times the weekly) tax credits and standard rate cut-off point figures as shown on form P45.
If emergency basis applies
See Calculation of tax under the PAYE system parts 8 and 9
8. Half-yearly pay
The following tax credits and standard rate cut-off point are to be set against pay:
If cumulative basis applies
The cumulative tax credits and standard rate cut-off point up to and including month 6 should be set against the first payment and those up to and including month 12 against the second payment, irrespective of the date on which the payment is made.
If month 1 basis applies
Half the yearly tax credits and standard rate cut-off point figures as shown on the tax credit certificate.
If temporary basis applies
Six times the monthly (or 26 times the weekly) tax credits and standard rate cut-off point figures as shown on form P45.
If emergency basis applies
See Calculation of tax under the PAYE system parts 8 and 9
9. Yearly pay
The following tax credits and standard rate cut-off point are to be set against pay:
If cumulative basis applies
The cumulative tax credits and standard rate cut-off point up to and including month 12 irrespective of the date on which the payment is made.
If month 1 basis or temporary basis applies
The amount of the yearly tax credits and standard rate cut-off point.
If emergency basis applies
See Calculation of tax under the PAYE system parts 8 and 9
Where remuneration of a company director is voted annually and no payment on account or in advance and no drawings on account are made before the voting of the remuneration, the tax credits, standard rate cut-off point and income tax rates for the year in which the remuneration is voted apply (not those of the year to which the remuneration relates). See Definition of pay parts 5.9 and 5.10 regarding the treatment of payments in advance and final payments.
10. Payments at irregular intervals (continuous employment)
If cumulative basis applies
Set off the cumulative tax credits and standard rate cutoff points for the week in which the payment is made.
If week 1 basis or temporary basis applies
- If the employment commenced before 1 January - set off the total of the tax credits and standard rate cut-off points for the income tax weeks from week 1 to the week in which the payment is made, both weeks inclusive.
- If the employment commenced since 1 January - set off the total of the tax credits and standard rate cutoff point for the income tax weeks from the week in which the employment commenced to the week in which the payment was made, both weeks inclusive. (If the temporary basis applies see New employees and employees recommencing part 11 regarding the tax credits and standard rate cut-off point for the week of commencement).
If emergency basis applies
See Calculation of tax under the PAYE system parts 8 and 9
11. Payments made other than on the employee's regular pay day
Where in any income tax week or month a payment (e.g. bonus, arrears of pay etc.) is made on a different day from the regular pay day, the employer may have difficulty in deciding what tax to deduct, if any.The essential point to bear in mind is that the tax for the week (or month) must be calculated by reference to the total of all payments made in the week (or month) and to the tax credits and standard rate cut-off point (cumulative or week 1/month 1 etc.) at that week or month. Tax credits and standard rate cut-off point for a subsequent week or month may not be brought back to cover the additional payment.
If the amount of the additional payment is small in comparison with the payment to be made on the next regular pay day, there would be no objection to making the payment in full provided that it was included in full in the pay figure for PAYE/PRSI purposes on the next pay day.
Example
A bonus of €200 is paid to an employee in week 37 after normal pay day. Normal pay is €600 per week and the cumulative basis applies.
The employee's weekly tax credits and standard rate cutoff point are as follows:
- Standard rate cut-off point €653
- Tax credits €68
For the purposes of this example, the rates of tax are taken as 20% (standard rate) and 41% (higher rate).
The employee's PAYE record, following the normal pay day in week 37 (and before payment of the bonus), should show:
| Cumulative net pay | Cumulative gross tax due | Cumulative tax credits | Cumulative tax due |
|---|---|---|---|
| 22,200 (600 x 37) | 4,440 (22,200 @ 20%) | 2,516 (68 x 37) | 1,924 |
The record at week 38 (after payment of the bonus) should show:
| Cumulative net pay | Cumulative gross tax due | Cumulative tax credits | Cumulative tax due |
|---|---|---|---|
| 23,000 (600 x 38 + 200) | 4,600 (23,000 @ 20%) | 2,581 (68 x 38) | 2,016 |
If the employer pays the bonus (€200) in full in week 37 then they must, on the normal pay day in week 38, calculate the PRSI contributions and the tax due on €800 (€600 normal pay for week 38 plus the €200 bonus).
12. Deduction of tax from "holiday pay"
The tax credits and standard rate cut-off point to be set against "holiday pay" paid in advance of the usual pay day are strictly those (whether cumulative, week 1/month 1, temporary or emergency) that relate to the income tax week or month in which it is paid.
If, however, the effect of paying holiday pay in advance is that the employee receives the equivalent of two or three weeks' pay in the same week and no pay in the following week, or following two weeks, the tax credits and standard rate cut-off point for those weeks may be set against holiday pay except where the employee is being paid holiday pay immediately before leaving the employment.
Where holiday pay is being included in the last payment of salary or wages before 31 December and the relevant holiday period includes a period of the next income tax year the procedure is as follows:
- if at the time the payment is being made a "multiyear" tax credit certificate or a tax credit certificate for the next year has been received, the amount of the holiday pay in respect of the period in the next year should be ascertained. The amount of tax, which would be deducted from the amount of such holiday pay as if it was paid in the next year, should be calculated and entries made in the pay record for the next year accordingly. The entries in the pay record for the current year should be the net amount of the pay after subtracting the amount of the holiday pay included in the next year's pay record from the amount of the total payment and the tax appropriate to such net amount on the basis of the cumulative tax credits and standard rate cut-off point at Week 52.
- if at the time the payment is being made neither a "multi-year" tax credit certificate nor a next year's tax credit certificate has been received, the tax to be deducted should be calculated on the basis of the cumulative tax credits and cut-off point at Week 52 and entries made in this year's record only.The benefit of the cumulative tax credits and standard rate cut-off point from 1 January will be given when the first payment of salary or wages is being made to the employee in the next year.
13. Emoluments earned before 1 January but paid on or after that date
Tax must be deducted from emoluments earned before 1 January but paid on or after that date in accordance with the tax credits and standard rate cut-off point due and the tax rate applicable at the time the payment is made.
An employee's tax credits and standard rate cut-off point are given on the tax credit certificate. This document will indicate whether the tax credits and standard rate cut-off point are to be given on a cumulative basis or on a week 1/month 1 basis. If there is no tax credit certificate the temporary basis (Employer's PAYE records part 9.1 and Calculation of tax under the PAYE system part 7 ) or emergency basis (Employer's PAYE records part 9.2 and Calculation of tax under the PAYE system parts 8 and 9 will apply.