Most of my fortnightly payslip has gone to tax after bonus sent to AVCs

P

peterwilson

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Hi
If this is the wrong place please let me know or if I need to get advise from a professional please recommend someone. Thanks.


I get paid fortnightly. Currently max out my AVCs.
I received a bonus in this fortnights pay.
I asked for it to be sent to AVCs.
Say my payslip is usually 2000 euro, well this one is 200 euro.

I could understand getting taxed on the bonus but how was my core pay hit too?


I asked payroll and their truly is below.

Thanks
P


Kindly note that your net pay has been reduced because of CBI AVC contributions. Also please note that USC and PRSI are applicable on your whole CBI bonus payment which has significantly reduced your net pay.

Kindly note that the taxes USC and PRSI are applied according to the statutory guidelines. The primary reason for reduction in your net pay is USC and PRSI. Hope this clarifies.
 
It is because they took your instruction for your bonus very literally. Say your bonus was €1K and you said to payroll, put my bonus in my AVC’s. They will put €1K in your AVC. And if your regular pay was say €2K for that time period then their calculation goes,

Pay 3K for this time period
AVC 1K, Balance 2K
All taxes, deductions, usc, prsi due on 3K, €1800
Wages - €200

What you should have instructed them to do was maintain my take home pay as normal and put any surplus due by reason of bonus into AVC. This calculation is more complex so I find payroll go with the above by default, unless specifically told otherwise.
 
Hi Clamball

I don't understand your description of what happened.

If his gross pay was 3,000 normally and €2,000 net.
If he got a bonus of €1,000 do they not deduct this from the €4,000 gross pay and end up with the same taxable of €3,000?

Brendan
 
In my experience Brendan they remove the full €1000 and place it in the AVC, and then deduct the USC and PRSI for €4000 gross from the €3000 that is left. Unless you are very specific with your instructions to payroll.
 
How much was the bonus? If the numbers are more like regular net pay 2000, bonus say 15,000 then you’d have extra PRSI&usc of 1.8k and net pay of 200?
 
Based on 40% tax & 8% USC, typically 80% is the amount of bonus to invest in AVC if you wish to pay in the max and keep your normal net pay.
Anything more will detract from your Normal Net pay
 
Brendan Burgess said:
Hi Clamball

I don't understand your description of what happened.

If his gross pay was 3,000 normally and €2,000 net.
If he got a bonus of €1,000 do they not deduct this from the €4,000 gross pay and end up with the same taxable of €3,000?

Brendan
Click to expand...
The problem, as others have alluded, is that pension contributions are only exempt from PAYE.

If the bonus is much larger than the usual post-tax monthly income, USC and PRSI on bonus can quickly eat that up.
 
Agree that it sounds like it's to do with the value of the bonus but it would need to be astronomical for additional PRSI [4%] and USC [max of 8%] to impact on regular net pay to the extent outlined by the OP!
 
Quite likely the tax relief on the extra AVC payment wasnt coded in at the time the payroll was processed. Once this is done, the OP should expect a refund on the next pay day.
 
One other point worth clarifying- the OP states that he's maxing out AVCs, which I take to mean that based on age, he's paying the maximum permissible amount of AVCs.

If the full bonus is now being paid in as an AVC (rather than say 30% of it or whatever), wouldn't that potentially mean that PAYE relief isn't being obtained on some portion of it?
 
deadlyduck said:
Agree that it sounds like it's to do with the value of the bonus but it would need to be astronomical for additional PRSI [4%] and USC [max of 8%] to impact on regular net pay to the extent outlined by the OP!
Click to expand...

A bonus of gross 15k would fit the numbers & with a net fortnightly salary of 2k (52k net yearly from just salary), 15k annual bonus wouldn’t be astronomical
 
T McGibney said:
Quite likely the tax relief on the extra AVC payment wasnt coded in at the time the payroll was processed. Once this is done, the OP should expect a refund on the next pay day.
Click to expand...

Also - even if the tax relief was coded in - they will only have been able to include the income so far this year - so there may be additional tax relief possible in January
 
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