Tax on a YTD basis and fluctuating net pay

[Sweet Pea]

Hi

I work for a large public sector body and am paid monthly (I'm a permanent employee). My nett salary each month fluctuates quite a lot and I am getting really fed up with it. I have been told that this is because I am taxed on a cumulative or 'Year to Date' basis. However, I have checked with two of my colleagues who would be taxed the same and their monthly pay does not vary.

This is my monthly nett pay since the start of the year:

January - €2326
February - €2423
March- €2334
April – €2247 (after a pay increase).

Here is what I sent to Payroll and the response I received back:


Hi

Now that I have received my full increment, I find that my salary this month is nearly €100 less than last month! So despite receiving a pay-rise in the middle of last month, I am considerably down in my salary.

I have done the sums and it appears my PAYE has been miscalculated by nearly €100.

This is how my payslip should have been calculated:

Main Pay €3,717.00

Total Pay €3,717.00

Deductions: €292.26

Gross Pay for PAYE €3424.74


PAYE Calculation:

Cut Off (Period) €2,668.83

€2668.83 x 20% = €533.76

Gross Pay for PAYE minus Cut Off = €755.91

€755.91 x 40% = €302.36

Total Tax: €836.12

Minus Tax Credit (Period) €271.15

Grand Total PAYE - €564.97

PAYE Deducted on Payslip - €657.38 - this is incorrect


Response:
Your year-to- date (YTD) PAYE for April is calculated as follows:


PAYE:

Gross taxable YTD: €13,404.26

Cut-Off YTD: €10,675.33

Tax Credits YTD: €1,084.60


€10,675.33 @ 20% = €2,135.07

+

€2,728.93 @ 40% = €1,091.57

-

€1,084.60 = €2,142.04 YTD

As you paid €1,484.66 YTD as of March, the difference of €657.38 was deducted in April to bring you up to date.

Could anyone explain how this works? I don't understand how an employee's salary can vary month to month by so much because they are taxed on a cumulative basis? Should I contact Revenue?

Many thanks

 

[jpd]

Each month, the payroll system calculates how much tax, PRSI and USC you should have paid for the year to date ie since st Jan. It then deducts the total tax, PRSI and USC paid to date ie in your example in the 3 months to March to get the amount to deduct for April.

If the amount changes each month, although your pay before tax doesn't, this means that your tax credits have changed for some reason. This could be for a number of reasons such as an error in last years tax which has been corrected this year, a change in your circumstances due to tax reclaims, changes in the tax because of the budget, an error in the payroll system, ...

You would have to post details of the gross pay and tax credits for each month to get a proper explanation. It looks like not enough tax was deducted in January and February

 

[elcato]

Did this happen last year ? As pointed out above some changes were made to your tax credits which should explain it and it should settle down now. Your Feb wage is about 100 above Jan and Mar so it may be the culprit for some mistake. At the end of the year make sure to request a P21 to see that your credits all match for the YTD.

 

[WaterWater]

I am taxed on a week1/month1 basis. My pension fluctuates every month. So far this year I have received 8 amended certificates of tax credits. As a result my pension is different every month.

I am told that the only way I can get an over payment of tax back is at the end of the year when I submit a completed Form 12.

 

[mathepac]

@WaterWater that is untrue. The reason for the year-to-date calculations is to spread the tax and other deductions evenly through-out the year, avoiding peaks and troughs in net pay.

As pointed out above, if there are changes to tax credits, gross pay, employee pension contribution, they will change deductions and net pay, but these *should* only be on a once-off basis, until the next change in variables (gross income or deductions).

Over/under payments in the same tax year should be repaid or deucted via payroll as a matter of course.

 

[WaterWater]

that is untrue. The reason for the year-to-date calculations is to spread the tax and other deductions evenly through-out the year, avoiding peaks and troughs in net pay.

It is true for people on Month1 Week1 basis.

Month 1 basis refers to people who are paid monthly. They are however the same thing. Essentially Month 1/Week 1 basis means that your taxes for each pay period are calculated completely in isolation and do not factor in anything else that has happened during the year up to that point.


[broken link removed]

 

[jpd]

Employees are taxed on Month1/Week1 basis because the employer does not have a tax cert from the Revenue or they are in a second job. It would be most unusual for a permanent employee to be taxed on a Month1 basis

The easiest way to check this is to ask the Payroll or Personnel department

 

[RedOnion]

It would be most unusual for a permanent employee to be taxed on a Month1 basis

It can happen for example where they also receive social welfare payments. Those returning to work after maternity leave would be an example.

In the case of Water water, there's mention of a pension so maybe it's being treated similarly.

 

[jpd]

The original poster was Sweet Pea who stated he is a permanent employee and, yes, if you have a number of taxable payments, then some of them might be on a Week1 basis

 

[RedOnion]

Sweet pea also stated:

I have been told that this is because I am taxed on a cumulative or 'Year to Date' basis

So the week 1 discussion is a side track.

Sweet Pea, log into Revenue online, and go to 'my documents'. Check if there are multiple tax credit certificates for the current year. If there are, check if your tax credits or rate band have been amended. You don't have standard credits or band. Are you married and jointly assessed?