Tax on low income query

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Maybrick

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Can anyone help with this query?

My wife is self-employed, works part-time and is projecting an annual income of 12,000. She is proposing to pay around 2,400 at the standard rate.
Since this brings her well below what she would get on the dole and my understanding was that low-paid people are outside the tax net, I'm a bit confused - am I missing something obvious?


Any help appreciated - as they say, every little helps.
 
Yes - I will come in at around 65,000 for the year in question, so we will save some money by making a joint return. Not that much, though...
 
With you using her personal credit on €12,000 (assuming after expenses ) she would have tax of €2,400 (at 20%) and PRSI of €360 (at 3% Class S ) leaving her with €9,240. If she only has Class S PRSI then she cannot qualify for Job Seekers Benefit anyway if she was unemployed, and would be means tested. With your income at €65,000 she would not likely qualify for any means tested payment.
 
Yes, I see. I'm just a little confused because my understanding was that people who earned less than 15,000 were outside the tax net - is that just a myth?
 
Maybrick said:
Yes, I see. I'm just a little confused because my understanding was that people who earned less than 15,000 were outside the tax net - is that just a myth?
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They are...but you're opting for joint assessment so you've €77,000 of income between the two of you. You're actually gaining from joint assessment though.
 
Yes, I understand that. But - and I'm sure I'm missing something very obvious - if she was single and made 12,000, how exactly would she escape the tax net?
 
Maybrick said:
Yes, I understand that. But - and I'm sure I'm missing something very obvious - if she was single and made 12,000, how exactly would she escape the tax net?
Click to expand...

As s single person her tax credits (self-employed) would be 1,830 and as a PAYE worker would be 3,660. That would allow her to earn 9,150 or 18,300 respectively before paying income tax ( ignoring PRSI ) .

You have chosen to allocate her tax credits to you under joint assessment. hence her higher tax. However you could always choose to give them back to her and in that case she would pay 1,830 less in tax giving her more take home pay. Of course you would then pay 1,830 more in tax so it balances out.
 
Sorry. I'm afraid you have to explain this to me like I'm a child - you say as a single self-employed person her tax credit is 1,830, which allows her to earn 9,150 before paying tax. Why do you multiply it by 5?
 
Got it, thanks. So that means the only people outside the tax net are earning under 9,150 (self-employed) or 18,300 (PAYE)? Does anybody know what proportion of taxpayers that is? I've read that something like a third are outside the tax net, but that sounds way too high?
 
Also exempt are those over 65 with income under €20,000 (single) or €40,000 (married).
 
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