Bonus paid - wondering about the tax rate applied

L

LostinPhilly1

Registered User
Messages
17
Hi all,

I recently got a bonus of €1,310 at work. My base salary is €48,000. My salary was paid out 20/01 and the bonus is getting paid out separately tomorrow.

For the base salary, the following deductions are normally applied:
Income Tax: €751
USC: €127
PRSI: €52.42

For the bonus paid separately, the following deductions were applied:
Income Tax: €524.15
USC: 58.97
PSRI: €52.42

I find it a bit strange that the income tax applied on the bonus payment is almost the same amount as the one applied on my monthly base salary. Whilst I had expected deductions from the bonus itself having already received bonuses before, having it slashed by close to 50% in taxes seems a bit high to me especially for such a small bonus.

Can anyone have a quick look at the above and advise?

Thanks!
 
Sunny said:
You have used your month's tax credits on your normal salary. Your will be paying 40% tax on all of the bonus. There is no difference to overall tax amount if salary and bonus were paid on the same day. It's just depressing to see.....
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I see. Thank you.
That's very depressing and a bit of a rip off if you ask me. It's especially blatant if the bonus is paid separately.
 
Any extra income earned by anybody is taxed at the person's marginal tax rate.

There are three marginal tax rates in Ireland: 0%, 20%, 40%.

Once a single person reaches 35,300, the MTR is 40%.

The entry point to the top MTR is very low in Ireland, very low.
 
jpd said:
How is that a rip-off?

Your employer just applied the tax laws as voted by the Dail
If you think taxes are too high, then vote a party that will lower taxes and consequently, any public services that are funded by taxes
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OK, it's a personal opinion. I'm not here to dive into a political tangent.
 
Protocol said:
Any extra income earned by anybody is taxed at the person's marginal tax rate.

There are three marginal tax rates in Ireland: 0%, 20%, 40%.

Once a single person reaches 35,300, the MTR is 40%.

The entry point to the top MTR is very low in Ireland, very low.
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Thank you. I can see that indeed!
 
jpd said:
vote a party that will lower taxes and consequently, any public services that are funded by taxes
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Yea, no, that's not how it works. Can't let that one stand unchallenged. Nearly half the workforce pays no income tax but all income at or above the average industrial wage has deductions of over 50%. That's the problem, not some nonsense implication that a broader and more balanced tax base will damage public services.
 
You pay 52% tax on bonus, if it's reflected to your payslip as "bonus". Happened to me once. Practically, government took bigger cut than me for my bonus.
 
Would your employer pay into an executive pension instead of having to take it through payroll. Something to ponder for again
 
barbaros said:
You pay 52% tax on bonus, if it's reflected to your payslip as "bonus". Happened to me once. Practically, government took bigger cut than me for my bonus.
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Eh no, it's nothing to do with how the employer has flagged it. All additional income is taxed at marginal rate, as others have said in this thread. There are no special taxes on bonuses (except for employees of state-supported banks earning a bonus of more than €20,000, who, between tax and USC, pay about 90% on the full amount.).

Familyman77 said:
Would your employer pay into an executive pension instead of having to take it through payroll. Something to ponder for again
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Need to be careful it's not seen as salary sacrifice for tax avoidance.

But this is a good point for OP. You can make AVCs to a pension and get 40% of it back in income tax relief (subject to certain age and income related limits).
 
It's worth checking if your employer has an APSS scheme available - you have to wait three years, but at the end of that time your bonus is paid out tax free.

Failing that I would go the AVC route; build up a nice lump sum for your future self.
 
MugsGame said:
Eh no, it's nothing to do with how the employer has flagged it. All additional income is taxed at marginal rate, as others have said in this thread. There are no special taxes on bonuses (except for employees of state-supported banks earning a bonus of more than €20,000, who, between tax and USC, pay about 90% on the full amount.).
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That's not (shouldn't be) an additional income. I am not getting payment from a different company, I am getting payment related my full time job. If it was included to my monthly salary, I would pay %40 tax on it (because of bracket) but because it was added as "bonus" I got taxed 52% for it.
 
barbaros said:
That's not (shouldn't be) an additional income. I am not getting payment from a different company, I am getting payment related my full time job. If it was included to my monthly salary, I would pay %40 tax on it (because of bracket) but because it was added as "bonus" I got taxed 52% for it.
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That is just completely wrong. Your basic salary is obviously above the €35.3k 40% tax band. Any additional/extra income, whether that be bonus, overtime or anything else will be at your marginal rate of 40% plus USC and PRSI so somewhere between 48-52%. Additional does not mean from a different source, it is just any income that is not your regular salary.
 
Apologies, so eventually I paid 52% tax on my bonus because of being 40% tax band (eg. im rich), so even my explanation is wrong the conclusion is right?
 
Your annual tax credits are divided up either weekly or monthly and go against your usual salary tax charged, if there is an additional amount of income from whatever source then there is no extra weekly or monthly tax credit to offset against it as it's been used up on your regular income therefore you end up paying tax on the full amount of the extra payment without any credit to make it lower like there is with your ordinary salary.

You pay tax on every penny you earn (more or less) but there are tax credits to offset against this amount charged every pay period, once you exceed the tax credit amount for that period then it's straight tax out of the extra with no reduction for credits.
 
barbaros said:
Apologies, so eventually I paid 52% tax on my bonus because of being 40% tax band (eg. im rich), so even my explanation is wrong the conclusion is right?
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Yes, basically you are rich :) On the off chance that there was an error in your payroll, you should log on to your revenue account and complete your Income Tax Return and get your P21 balancing statements for the last 4 years. You might be pleasantly surprised to see you have not claimed all of your tax credits or that you have indeed overpaid IT, USC or PRSI. It can easily happen particularly if moving between companies. Any refund due will feel like a 100% tax free bonus ;)
 
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