How much can a spouse earn before paying 40% tax?

Brendan Burgess

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A friend of mine has asked me this. Her husband is paying the top rate of tax. She would like a part-time job but says it's not worth it because of the tax.

Is the following reasoning correct:

If she earns €24,8000 , she will get an additional 20% tax band of €24,800

So her increased earnings would be:

upload_2017-9-6_12-14-7.png


I don't think she gets the Home Carer's Tax Credit, so she would not be losing that by working.

Brendan
 

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gnf_ireland

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Also worth considering pension contributions here - depending on their age they could increase this by 20-40% if they put that money into a pension fund. This may be an advantageous option depending on age, especially if getting relief at the higher rate on it.

Key to the numbers above is that they remain jointly assessed for tax purposes
 

RedOnion

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I only realised recently how high it is. We're currently a single income household, but her CV got typed up very fast when I worked out the tax...
 

llgon

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Do you know if she has any investment or other income in her own name? This could affect the calculation.
 

DB74

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Generally it's the cost of childcare plus loss of Home Carers Credit which makes it not worth it
 

gnf_ireland

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Agree @DB74 but this also can change as childcare needs change - e.g. Hitting 1st class or children entering secondary school
 

Brendan Burgess

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upload_2017-9-6_17-28-23.png

Hi guys

I have added in a new column for someone earning €8,000

Effectively the first €8,000 is tax-free.

Is that correct?

Brendan
 

RedOnion

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Generally it's the cost of childcare plus loss of Home Carers Credit which makes it not worth it
I actually looked at reducing my hours, and my wife getting a part-time job. For any married couple with an income over 77,600 after pension contributions, they are better off by 8k per annum after taxes where each person earns at least 33,800 versus where there's a single earner.

Not impossible for a professional couple.

(She hasn't let me cut back to 3 day week yet).
 

RedOnion

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To put some real examples on this after talking to some colleagues working part-time. For someone working a 3 day week.
Assuming no other income, and spouse is in higher tax bracket.

Someone on 40k pro-rata for a 3 day week falls under the threshold.
With a 20% pension contribution it pushes up to 51.6k.

Someone returning to work on 1st October on 60k pro-rata would only pay 200 income tax this year (extra for PRSI). If it's contract work, or using parental leave, you could work 8 months a year without going into higher bracket. Again, 20% pension pushes this up to 75k, and you're off work for the school holidays.
 

sooty

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Hi can i ask a question about this - i am currently not working - husband gets all tax credits - am i correct is saying if i go back to work his tax credits will reduce by E1650?
 

bhoy1967

Registered User
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11
HI,

Can I ask a question in relation to this?

My wife worked a few weeks leading up the Christmas last year, I am in the process of submitting my P12 but I can't seem to add her employee tax credit, Can you claim both the employee tax credit and the home carers tax credit?

Thanks a lot.
 

cian8

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104
To put some real examples on this after talking to some colleagues working part-time. For someone working a 3 day week.
Assuming no other income, and spouse is in higher tax bracket.

Someone on 40k pro-rata for a 3 day week falls under the threshold.
With a 20% pension contribution it pushes up to 51.6k.

Someone returning to work on 1st October on 60k pro-rata would only pay 200 income tax this year (extra for PRSI). If it's contract work, or using parental leave, you could work 8 months a year without going into higher bracket. Again, 20% pension pushes this up to 75k, and you're off work for the school holidays.
Apologies for resurrecting an old thread but this seems relevant to my situation. If anyone could check my workings + logic here it would be greatly appreciated. I am on higher rate tax, also with rental income, my wife is currently working 3 days per week and availing of parental leave 2 days per week. If it would be feasible to increase pension contribution three-fold and only have circa 7% reduction in monthly take home it would seem a no-brainer! That is if I understand correctly.

Thanks in advance.

20% cut-off
26300​
Spouse Salary
50874​
3 day week
30524.4​
Pension
5%​
14%​
1526.22​
4273.416​
Taxable income
28998.18​
26250.98​
Tax 20%
5260​
5250.197​
Tax 40%
1079.27​
0​
Tax Total
6339.27​
5250.20​
Take home
22658.91​
21000.79​
 
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