FAQ FAQ on Income Levy

Towger

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*** Bands and Rates Revised on the 7th of April 2009 ***


  • Exemption Threshold (Under 65) - 15,028
  • Exemption Threshold (65 and over) - 20,000
  • Middle Rate Threshold - 75,036
  • Higher Rate Threshold - 174,980


  • Lower Rate - 2%
  • Middle Rate - 4%
  • Higher Rate - 6%

14 April 2009 - No Data currently available on Ends of Year Refunds etc.


The Askaboutmoney Income Levy FAQ – Work in progress – Revision 6
Last Updated 14th January 2009

This is the Askaboutmoney Income Levy FAQ, more detail can be found in http://www.revenue.ie/en/practitioner/law/income-levy.pdf. This FAO has no legal standing and no responsibility of any kind will be taken for its contents.


Q. What is the Income Levy?
A. It is a temporary tax on all income (with some exceptions) to prop up the government’s tax take. It will come into effect on the 1 January and is payable on gross income before relief for capital allowances, losses or pension.


Q. What are the Bands and Rates for the Income Levy?
A. Once you income exceeds the Exempt Thresholds the following applies:

1% on first €100,100
2% on next €150,020
3% on balance

For more detail see the rest of the FAO.


Q. How long will the Levy last?
A. Previous temporary taxes have proved to be very long lived.


Q. Why have the Government introduced an Income Levy.
A. They relied too much on a temporary increase in Stamp Duty and Construction Sector VAT Returns. These windfalls have now dried up, but public sector day to day spending has risen greatly in the meantime, relying on this short term additional money.


Q. How much will it cost the country to implement the Income Levy.
A. Millions, it would have been much cheaper and easier to increase PAYE and/or PRSI etc.


Q. Is there any advantage in bringing in an additional Levy to increasing PAYE and/or PRSI?
A. Yes. The Levy is calculated on Gross Income before any fancy deductions/tax right offs etc.


Q. Why not remove the Employee’s Upper Earnings PRSI limit?
A. It will not bring in as much money, but may yet happen.


Q. Will the Income Levy bring in enough money to cover the short fall in Taxes.
A. No. Not by a long way.



How it all works

Q. What Income falls under the Income Levy.
A. From the Finance Act Memo: http://www.finance.gov.ie/documents/publications/financeno.2%20bill%202008/FinNo.2memo.pdf

The levy will apply to all income in a similar manner to the Tax Acts, but will be applied before granting relief for pension contributions or deductions for capital allowances.
Social welfare payments and a number of similar type payments made by other Departments, as well as similar payments from other States will be excluded.
There will be an age related exemption for persons aged over 65 years who have a gross income of less than \20,000 with a provision for double that limit for a married couple.
An exemption threshold of \18,304 will apply so as to exclude those on low incomes.

  • PAYE Income.
All income including BIK (Notional Pay) before Employee Pension is deducted.

The following are exempt:
Salary Sacrifice for Annual Travel Tickets. Profit Sharing, Bicycle Scheme and the ‘€250 BIK free’

Employer Pension – Is not included in Leviable Income calculation.

  • Rental Income.
Unclear: “It is on Gross Income before capital allowances, losses or pension contributions.” How this effects Section 23 properties etc is un clear
  • Other Incomes
Everything that is not in Appendex A and B of Revenue's Income Levy FAQ.

Q. What Income does not fall under the Levy?



A.
  • All Social Welfare payments from Ireland and abroad.
  • Payments made in lieu of Social Werfare Payments eg:
- Community Employment (C.E.) Schemes.
- Back to Education Allowance.
See Appendix A of Revenue's Income Levy FAQ for a full listing of social welfare exemptions.
  • Income subject to DIRT.
  • Child Benefit.
  • Rent a Room Scheme.
  • Payments in Respect to Redundancy, which are not normally taxed.
  • Childcare Service Relief.
  • Income below the Exemption Thresholds, see section below.
  • For a full listing see Appendix B of Revenue's Income Levy FAQ.
Q. Am I exempt from the Income Levy?



A. You may be if:
  • Your income for the year does not exceed your Exemption Threshold.
  • You hold a full Medical Card.
  • Your income is from Social Welfare payments.
Q. What are the Exemption Thresholds?





A. The following exemption thresholds apply. If your total Leviable income is within them you are exempt:
  • Age 0 to 64 single or married - Up to and including €18,304 @ 0%
  • Age 65 single or spouse working - Up to and including €20,000 @ 0%
  • Age 65 married and one income - Up to and including €40,000 @ 0%
Q. Why is the ‘up to 64 age limit’ €18,304, rather than €17,500 as previously announced?

A. 18,304 / 52 = €352 per week, which is PRSI Class AX. This is to match the start of the Income Levy deduction with Employee PRSI.
Note: For Monthly Paid Employees, the Income Levy starts at €1,526, while Employer PRSI starts at €1,525.


Q. Why do the 65s and over’s get better exemption thresholds.
A. Sweetener after the Medical Card debacle.


Q. What are the Bands and Rates for the Income Levy?



A. Once you income exceeds the Exempt Thresholds the following applies:
  • Up to and including €100,100 @ 1%
  • Above €100,100 and up to and including €250,120 @ 2%
  • Above €250,120 @ 3%
Q . Do the bands double if I am married?
A. No. Except for exemption threshold for married couples 65 or over, the Income Levy is “individualised”.



How is it calculated - Part 1 : Yearly.

Q. How is it calculated - Part 1 : Yearly.
A. For a year it is calculated like so:

Leviable Income = €17,000, Age = 20, Marital Status = NA.
Levy = €0, income in the ‘age < 65’ exemption threshold.

Leviable Income = €20,000, Age = 70, Marital Status = Widow
Levy = €0, income in the ‘age >= 65 & Single’ exemption threshold.

Leviable Income = €20,001, Age = 70, Marital Status = Widow
Levy = €200.01, income above the ’age >= 65 & Single’ exemption threshold and in the 1% band.

Leviable Income = €30,000, Age = 70, Marital Status = Married
Levy = €0, income in the ‘age >= 65 & Married’ exemption threshold.

Leviable Income = €50,000, Age = 40, Marital Status = NA.
Levy = €500, income above the ‘age < 65’ exemption thresholds and in the 1% band.

Leviable Income = €50,000, Age = 66, Marital Status = Single.
Levy = €500, income above the ’age >= 65 & Single’ exemption threshold and in the 1% band.

Leviable Income = €150,000, Age = 50, Marital Status = NA.
Levy on €100,100 @ 1% = 1,001.00
Levy on €49,900 @ 2%= €998
Total Levy = 1999, income above the ‘age < 65’ exemption threshold and in the 1% & 2% bands.

Leviable Income = €300,000, Age =60, Marital Status = NA.
Levy on €100,100 @ 1% = 1,001.00
Levy on €150,020 @ 2%= €3,000.40
Levy on €49,880 @ 3% = €1,496.40
Total Levy = €5,497.80, income above the ‘age < 65’ exemption threshold and in the 1%, 2% & 3% bands.
 

Towger

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FAQ on Income Levy after editing by Brendan

How it is calculated Part 2 : PAYE Weekly/Monthly

This is where the fun starts. For the Income Levy to be calculated correctly each employer must know each new employee’s previous Leviable Income. But this would require changes to a large number of Revenue’s paper and electronic forms and their various computers systems etc.

For a PAYE worker paid Weekly or Month etc. The bands and exemption thresholds are divided by the number of periods in your pay frequency and the calculations are performed on a ‘Week1’ basis. Execpt for employees who have been with their employer for the full year (52 Insurable Weeks), in the last tax period of the year, they will be calculated on a yearly basis and any refunds given.

For example this means for weekly paid employees, the 18,304 Yearly exemption threshold is divided by 52 weeks to give an exemption threshold of €352 per week, and so on.


Q. What are the Weekly Exemption Thresholds?

A. The following Weekly Exemption Thresholds apply. If your total Leviable income is within them for the week you are exempt:
  • Age 0 to 64 single or married - Up to and including €352 @ 0%
  • Age 65 single or spouse working - Up to and including €385 @ 0%
  • Age 65 married and one income - Up to and including €777 @ 0%
Q. What are the Weekly Bands and Rates for the Income Levy?

A. Once you income exceeds the Weekly Exempt Thresholds the following applies:
  • Up to and including €1,925 @ 1%
  • Above €1,925 and up to and including €4,810 @ 2%
  • Above €4,810 @ 3%
Q. What are the Monthly Exemption Thresholds?

A. The following Monthly Exemption Thresholds apply. If your total Leviable income is within them for the month you are exempt:
  • Age 0 to 64 single or married - Up to and including €1,526 @ 0%
  • Age 65 single or spouse working - Up to and including €1,667 @ 0%
  • Age 65 married and one income - Up to and including €3,334 @ 0%
Q. What are the Monthly Bands and Rates for the Income Levy?

A. Once you income exceeds the Monthly Exempt Thresholds the following applies:
  • Up to and including €8,342? @ 1%
  • Above €8,341.67 (rounded to €8,342?) and up to and including €20,844 @ 2%
  • Above €20,844 @ 3%
Q. Hold on a second, I am Fortnightly Paid, where are my rates?
A. If you are Fortnightly or Four weekly etc, multiply the Weekly values by 2 or 4 respectively.


Q. What happens if I go over an Exemption Threshold or Bands for one (or more) period(s), but over the year I am below the annual limit.
A. If you have been continusly employed by your employer for the full year, your employer has to recalculate your Income Levy for the year (at the end of the year) and refund any over payment!
 

Towger

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FAQ on Income Levy after editing by Brendan

Miscellaneous Questions

Q. Does the Income Levy reduce my taxable income for PAYE / PRSI purposes?
A. No.


Q. I am leaving the company half way through the year, but I went over an Exemption Threshold or Band for one period. I think I am due a refund?
A. Your Employer will issue a Certificate (Name yet to be decided by Revenue). This should be kept and used for claiming refunds back from Revenue. It should not be given to your next Employer.


Q. How does my employer recalculate the Levy on a yearly basis for Week 53, Fortnight 27 or Fourweekly 14?
A. Your Employer does not reculate the Income Levy for Week 53 etc. Week 53 is to be calculated on a Week 1 Basis. The Income Levy can only recalculated and refunds given on a Yearly Basis in Week 52, Monh 12 etc


Q. I am an Employer, how am I supposed to administer all of this?
A. Start praying for divine inspiration. It gets worse.


Q. What happens if I change jobs and end up under or over paying the Income Levy, through no fault of my own?
A. Revenue will look for the money off you or credit back any over payments.


Q. How can my employer correctly recalculate my Levy at the end of the year if they don’t know my correct Leviable Earnings from my Previous Employment.
A. They can't. Your Employer will calculate the Income Levy on a Week 1 Basis for the full year. No redund will be given by the Employer at the ends of the year.


Q. What happens if I turn 65 during the year.
A. The full year should be treated as if 65.


Q. What happens if over 65 or over and partner dies/ divorce during the year?
A. Unknown.


Q. What happens if 65 and over and get married during the year?
A. Unknown.


Q. How will my employer/pension provider know if I am Married?
A. If you qualify for the €40,000 Exemption Threshold, Revenue will credit you back with any over payments. It is of no concern of your Employer/Pension provider, who will just overate off the 'Single' Thresholds.


Q. I am over 65. How will my Employer/Pension Provider know if my Spouse has a job or any Leviable Income?
A. If you qualify for the €40,000 Exemption Threshold, Revenue will credit you back with any over payments. It is of no concern of your Employer/Pension provider, who will just overate off the 'Single' Thresholds.


Q.What if I have a few bob from other sources etc, and that few bob will push me over the exempt threshold?
A. It is of no concern of your Employer/Pension provided, who will just operate off the 'Single' Thresholds. Revenue will handle any over of under payment.


Q. What if I have two or more jobs at the same time and the my total Leviable Income from these jobs exceeds my Exemption Threshold, but is under the Income Levy Threshold for one, some or all my different employments?
A. This is of no concern of your individual employers. They will overate on your Exemption Threshold in isolation. After the end of the Tax Year, Revenue will recalculate your correct Income Levy from all employments and look for the underpayment from you.


Q. How will they look for the Under Payment from me.
A. Most probably your Tax Credits will be lowered the following year. Small underpayments may be written off.



Q. What happens to the Levy deducted.
A. The Employer adds the Income Levy into the PAYE (Parking Levy is added to PRSI) portion of their P30 Return, which is sent to the Collector General.


Q. How will Revenue know how much Income Levy I Paid.
A. The P35 and the P60 will be amended to include the information, sometime next year. If you leave during the tax year your Employer will issue a "Certificate on Cessation of Employment" (Name undecided). It will contain the Gross Income Leviable Pay, Income Levy Deducted Name, Address, PPS No etc. It is to be kept for your own and Revenue's records. It is not to be given to your new employer.


Q. Does the levy apply to redundancy payments? If yes, is the statutory portion exempt?
A. The Income Levy does not apply to the Tax Exempt portion of redundancy payments.


Q. I write payroll software. This is going to be a nightmare for me. What am I going to do and where can I get more information.
A. You can contact the Payroll Software Developers Association. (http://www.psda.ie/ work in progress.)


Q. We are closing down early next year, ROS is rejecting my P35 return for 2009.
A. You need to hold off for a few months or make a manual P35 Return. It going to take months for ROS to be updated to support a new yet unpublished P35 file specification. You may also need a update of your payroll software.


Q. The 3% Income Levy Rate is in the Finance Act, but was not in the Budget. What is it's legal standing?
A. The 3% Income Levy Rate has no legal standing until the Finance Act is signed into law by the President.


Q. I'm paid in arrears, my payslip received last Thursday, 8th January 2009 covers a working period in December 2008. However, the payroll department did apply the 1% income levy. I think this is incorrect.
A. In simple terms income is tax when it is paid, not when it is earned.


Q. If you take a drop in wage, will the 1% levy be adjusted to your lower earnings?
A. Yes. The Income Levy is just like any other TAX. Also if you income drops and you don't earn over the €18,302 Threshold for a year you are due a refund of any Income Levy Paid.


Q. Does social welfare exemptions refere to state pensions ?
A. The income levy is not charged on contributory or non-contributory State pensions. This means that a pensioner aged 66 or over and single can have income of almost €32,000 p.a. before they are subject to the income levy (€11,976 State pension and €20,000 occupational pension). (Revenue FAQ)
 

juke

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Re: Anyone like to write a key post on the income levy?

See updated FAQ
 

Brendan Burgess

Founder
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Towger

Thanks a million. That is absolutely brilliant. I had read nothing on the levy and now I feel that I could give a lecture on it!

Brendan
 

Purple

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Superb stuff Towger; you must have been at that for hours.
Tomorrow when I get a stream of questions on this in work I can sound like I know what 'm talking about.
 

MugsGame

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Very helpful. Await clarification on treatment of rental and interest income with "interest"!

As it's a levy I assume it doesn't reduce your taxable income for PAYE / PRSI purposes?

> See updated FAQ
 

Towger

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Where are you seeing this?
It was in the news at the time. The Income Levy is on all income (except from social wefare and the like). Deposit Interest is (or should be) taxed at your margional rate already, with DIRT credited back. There is nothing to say it is not subect to the Income Levy.

Update: No Levy on income subject to DIRT.

> See updated FAQ
 
Last edited:

Paddyo

Registered User
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I write a small payroll system and this is going to be a nightmare for me.

> See updated FAQ
 

michaelm

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Great work. If they wanted to extract more tax then they should have just removed the ceiling on PRSI instead of all this messing.

> See updated FAQ
 

Black Sheep

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Towger; Thanks a mill for that. Have been on another plannet during the past due to family upheaval and have never got to grips with that levy. I think I'll have a laminated copy of that on my desk
 

Towger

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Levy Update: Revenue have published Version 3 of "Income Levy [FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Notes for Guidance and Implementation Arrangements for Employers" [/FONT][/FONT]
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]http://www.revenue.ie/income-levy.pdf
[/FONT]
[/FONT]
 

Bronte

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Thanks for the great guide and I too await news on how it applies to rental income. I cannot believe they have created such a complicated system. How much will this cost to administer. Small businesses are going to be up in arms.
 
Z

z107

Guest
How much will this cost to administer. Small businesses are going to be up in arms.
It is like the Government are trying to make income tax calculations as complicated as PRSI.
We've certainly experienced an influx of new customers concerned about the levy.
 

Towger

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2,126
Thanks for the great guide and I too await news on how it applies to rental income.
When things calm down I'll get the info. As it is there is a mistake in the thresholds in 'Version 3'. :rolleyes:

It is some system... For example, an employee can be over the Weekly 352 threshold for most of the year, in Week 52 be below the Yearly 18,304 threshold. So they get a refund of say €180. They then have a Week 53, go over €18,304 and end up owning Revenue €180. :eek:
 

MugsGame

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Things that jumped out at me from v3
1.4 - I can't find anything to say that rental income is excluded,
2.10 - Week 1 treatment of bonuses can lead to temporary overpayment of levy
2.18 - Seems like a non-issue given week 1 basis
2.19 - Levy applies to some previously exempt income - artists, stud fees, etc. Given 1.4, Section 23/50 offsets could also come under the levy!
 

Howitzer

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1,459
Things that jumped out at me from v3
1.4 - I can't find anything to say that rental income is excluded,
2.19 - Levy applies to some previously exempt income - artists, stud fees, etc. Given 1.4, Section 23/50 offsets could also come under the levy!
Just to completely spagethify the threads, Brendan's post here would indicate to me that interest is a deductable expense but S23/50 fall under the previously exempt income category. So the answer seems to be yes and no, which would be par for the course I suppose.
 

Towger

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2,126
Appendix B included rent a room is levy free, otherwise I don't see rental income being "Levy Free".
It is the Section 23 etc and 'before' loses what are interesting. So if you are renting out a house, making loss (subsidising the mortgage), but do you still have to pay the levy on in the rental income after expenses, but before you top up the mortgage payments out of your pocket?

If you can formulate the exact questions on Rental Income. I can sent it into the section in Revenue dealing with the Levy's implementation.

 
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