Self Employed & PAYE in Form 11

michaelcunning

Registered User
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I wonder could you clarify for me – should the addition of PAYE income (with tax etc being taken at source) have any effect on my final year Form 11 commutated tax bill?

Reason I ask is that after I completed the form 11 (using ROS Offline) and then I added in Income/USC values (based on 40,000 a year) into the PAYE/BIK/Pensions section (using an online salary calculator from PWC), my final tax liability went up substantially from when I computed without the PAYE section filled. I assumed that the PAYE additions wouldn’t affect the final year tax liability because I would have paid tax/prsi/usc on this PAYE income already?

I didn’t see a space for inputting PAYE PRSI, maybe that is where I went wrong?
 
In 2016 form I think it's called the 'employee credit'
I presume that's it. A more general question is my self employed tax liability (as computed from ros offline form 11 ) should not be affected by paye income. Is that correct?
 
If you earn €30k under PAYE you pay €2,500 in Income Tax.

If you earn a further €10,000 in self employment then you will owe a further approx €3,200 in Income Tax because you have used up all your credits and most of your standard rate cut off in your PAYE job.
 
thanks for that. Am still confused though. If I earn 40000 from paye and 24000 from self employed income, why is the addition of paye income on the form 11 pushing up my self employed tax seeing as how i will have paid tax on the PAYE income at source already? It seems like I'm being taxed twice for the paye income..am I staring down the barrel or a huge extra (ie non paye) tax bill for 2016?
 
This is common enough for people to not understand how the tax system works.

PAYE operates by allocating your tax credits and standard rate band to your PAYE income first. As you have told the tax office this is what you want.

So you use up your personal credits and 20% tax and against your PAYE income.

So in your case your will have paid approx 5,700 in Income Tax on your PAYE income but used up all your benefits.

This means that you will pay tax at 40% on your selfemployed income. In your case it's €24,000 x 40% = €11,200. It's not double tax it's just tax.
 
Certainly is unfortunate.

I am self employed for the last few years, mostly small amounts of income a large number of clients. Recently i was asked to give a price for a fairly large chunk of work. I decided that about €10k would be a reasonable price. That was before I realised that I would have to pay 50% of that in tax. I would have to charge €20k to get a fair income for the work. Ouch!!
 
That's painful. My main concern is that whatever tax I calculate I will have to pay prelim as well for the same amount so my tax bill will be double. #justwhatineed
 
Presumably the OP declared a 0 prelim in 2016 and therefore will owe for 2016 and Prelim for 2017 in October 2017!
 
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