I admit it very confusing ways they do that. But it looks correct to me but not a tax person.Hi. I was out of work due to illness and received Illness Benefit from the state. I understand this is subject to PAYE, so as a higher-rate taxpayer I expect to be paying 40% of it back in PAYE.
On my updated tax credit certificate, I see Revenue has been informed of the first €2412 benefit I received. They have reduced my tax credits by €2412 and also reduced my standard rate tax band by €12064. From what I understand, the effect of reducing my tax credits is that I will pay an extra €2412 in PAYE. And the effect of the tax band reduction is another €12064 x 20% = €2412 in PAYE. So in total, I'll be paying an additional €4824 in PAYE for the €2412 in illness benefit I received.
This seems very wrong - the extra tax being double the benefit received. I'd expect the additional PAYE to be 40% of €2412, i.e. approx €965. Or am I misunderstanding how my tax credits work?
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No the rate band change is capture the extra 20% difference! between the two. if you higher rate worker for the year. The tax credits reduction captures the first 20% which brings it to 40% totalThanks @irbx . I've always been a higher-rate taxpayer. Don't the changes to tax credits and bands mean I'm paying an extra €4824 in PAYE for having received a benefit of 2412?
Sorry maybe I misunderstood. How much illnesses benefit payment did you actually get from social welfare?Sorry, I'm still not following. When calculating my PAYE:
- I was previously paying 20% on the first €42000 and 40% on everything after that. Now I'm paying 20% on the first €29936 and 40% on everything after that. So the net change from that alone is an increase of €2412 in PAYE for the year.
- Then the tax credits. Tax credits reduce the PAYE that I pay after calculating using the tax bands above. So when my tax credit is reduced by €2412 it means I pay €2412 more in PAYE, regardless of the tax bands.
Either of these two changes alone would result in me paying an additional €2412 in PAYE, meaning I'm paying back a sum equal to the entire benefit I reeceived. The two changes together mean I'm paying back double what I received. Unless I'm completely mistaken, which is very possible.
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