Understanding taxation can be difficult, especially when there’s so many confusing terms involved. Often misunderstandings or lack of understanding regarding taxation can lead to overpayment of tax. We’ve created a quick guide to explain the top ten tax terms.
Tax credits exist to reduce the amount of tax you have to pay. There are different credits available for different circumstances, though everyone’s at least entitled to the Personal tax credit, which is €1,650 for single people.
2. Tax Deductions
Tax deductions are sums of money that aren’t considered when your tax liability is calculated, e.g. pension or permanent health insurance contributions. However, many of us forget to claim them, learn the most common tax deductions in this article.
3. Gross Income
Your gross income is the total amount of money you make before any deductions are made. This includes every source of income you may have.
4. Net Income
Net income is the actual amount received by you from your wages.
5. Taxable Income
Taxable income is the amount of your income you pay taxes on. This is different from gross income as certain allowable deductions are taken from your gross wages before income tax is calculated. An example of this would be payments made into a private pension.
Pay As You Earn is when your employer is required by law to deduct your taxes directly from your gross wages. They then send this off to the Revenue Commissioners on your behalf.
Pay Related Social Insurance is a contribution to the Social Insurance Fund, which pays for Social Welfare benefits and pensions. This is automatically taken from your wages if you’re a PAYE worker making more than €38 a week.
The Universal Social Charge replaced the income and healthy levy’s in 2011. It’s automatically taken from your salary if you earn more than €12,012 in 2015 and more than €10,036 in 2012, 2013 and 2014. However, some income sources are exempt. Find out what rates you’re expected to pay in 2016 on citizensinformation.ie.
If you leave your job, your employer has to give you a P45. This declares how much you earned, along with how much USC, tax and PRSI was taken from your salary. You need to give this to your next employer to avoid being emergency taxed.
Your employer also gives you a P60 at the start of every year. This sums up the previous year’s pay, as well as the tax, USC, LPT and PRSI deducted from your wages.
Think you may have overpaid tax in the last 4 years? Contact our team of tax experts at Irish Tax Rebates. We advise on tax relief applicable to your expenses and help you to get your money back in a matter of weeks.
We have the highest average tax rebate in Ireland and the lowest fee; and if you aren’t owed any tax back, there is no fee applied. To get the ball rolling, you can apply for your tax back online today.
For more simple explanations of Irish taxation and how you may be due tax back, read our previous blog posts.