# Is the "PAYE Tax Credit" at the standard rate?



## podge3 (22 Apr 2010)

I thought I understood our system of tax credits but I'm completely confused after receiving my 2009 Balancing Statement. 

I work full time and earn about €55k. My wife doesn't work outside the home but for the past few years has worked for a few weeks per year and last year (2009) earned €1600. She claims the Home Carers tax credit.

Up to 2009, the PAYE Tax Credit (€1830) covered my wife's small earnings and she paid no tax. But in 2009, she was only allowed €320 for this credit. I rang Revenue and was told that this credit is only available at the standard rate so 20% of €1600 is €320. To get the full €1830 credit she would need to earn €9150.

Is this correct? If it is, then we owe the Revenue a couple of grand for the past few years that she has worked!


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## dockingtrade (22 Apr 2010)

1600 is the amount she earned, her tax liabilty is only 320 i.e. she uses 320 of a max of 1830 credit  to cover this. You can only get a credit for the the amount of tax paid up to 1830. Its a non refundable tax credit. Should be ok with revenue.


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## podge3 (22 Apr 2010)

dockingtrade said:


> 1600 is the amount she earned, her tax liabilty is only 320 i.e. she uses 320 of a max of 1830 credit to cover this. You can only get a credit for the the amount of tax paid up to 1830. Its a non refundable tax credit. Should be ok with revenue.


Thanks for the reply.

I understand that its non-transferable but my wife and I are jointly assessed so aren't her earnings taxed @ 41%? i.e. her earnings are just added to mine and any excess over €45,400 is taxed @ 41%?


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## pos (22 Apr 2010)

No, the band for a married couple's joint income is €72,800 at the lower rate.
However the max earnings either can have taxed at the lower rate is €45,400.
So your wife could earn up to €27,000 at the lower rate


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## podge3 (22 Apr 2010)

pos said:


> No, the band for a married couple's joint income is €72,800 at the lower rate.
> However the max earnings either can have taxed at the lower rate is €45,400.
> So your wife could earn up to €27,000 at the lower rate


Because we are getting the Home Carers Allowance, we cannot avail of the increased standard rate tax band for dual income couples.


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## allthedoyles (22 Apr 2010)

podge3 said:


> Because we are getting the Home Carers Allowance, we cannot avail of the increased standard rate tax band for dual income couples.


 
This is true , for 2009 . You see when the tax office were issuing your P21 , they automatically give you whichever system is more favourable to you . 
In your case it is obviously more favourable to claim the Home Carer Tax Credit .

However , in 2010 , you can still adjust your tax credits .
If you do not wish to claim Home-Carers , you can avail of the increased standard rate tax band .

Regarding your wife's PAYE Tax Credit , please note that she will always , only receive a tax credit for the amount of here earnings up to a maximum of 1830 euro.

Example : If she earns € 5,000 in 2010 , her maximum paye tax credit will be €1,000.

Ye will lose the remaining € 830 tax credit  .


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## dockingtrade (22 Apr 2010)

allthedoyles said:


> Ye will lose the remaining € 830 tax credit .


 

in that example above does the Hc credit make up for that, or do you only get the HC and no paye credit, where you claim a HC credit?

ie

married couples 3660
paye spouse 1 1830
paye spouse 2 1000 ?
HC                   900


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## allthedoyles (22 Apr 2010)

dockingtrade said:


> in that example above does the Hc credit make up for that, or do you only get the HC and no paye credit, where you claim a HC credit?
> ie
> _*married couples 3660*_
> _*paye spouse 1 1830*_
> ...


 
HC and Paye are two separate tax credits , so your example above is correct - 

ie 
you will receive both.


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## podge3 (26 Apr 2010)

Thanks for all the replies.

My problem is that I have all the tax credits and standard rate band. So my wife's small income is being taxed at 41%.

However when I got the balancing statement, she was only allowed a credit of 20% of her wage, meaning that she was still taxed @ 21%. I makes her working kinda pointless.


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## huskerdu (26 Apr 2010)

podge3 said:


> Thanks for all the replies.
> 
> My problem is that I have all the tax credits and standard rate band. So my wife's small income is being taxed at 41%.
> 
> However when I got the balancing statement, she was only allowed a credit of 20% of her wage, meaning that she was still taxed @ 21%. I makes her working kinda pointless.



This isn't true. Your wife earned 1600 and paid no tax on this because
of her tax credit was more than the tax on 1600.


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## podge3 (26 Apr 2010)

huskerdu said:


> This isn't true. Your wife earned 1600 and paid no tax on this because
> of her tax credit was more than the tax on 1600.


Thats how I thought it should work. 

She paid tax @ 41% on her €1600 because I have all the standard rate band.

But the revenue are only allowing her €320 o the €1830 allowance i.e. 20% of €1600. So she effectively paid tax @ 21% on the €1600 even though she still had some of her tax credit available.


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## huskerdu (27 Apr 2010)

podge3 said:


> Thats how I thought it should work.
> 
> She paid tax @ 41% on her €1600 because I have all the standard rate band.
> 
> But the revenue are only allowing her €320 o the €1830 allowance i.e. 20% of €1600. So she effectively paid tax @ 21% on the €1600 even though she still had some of her tax credit available.



Your wife has a standard rate band of 27K which that she cant transfer to you. Because she was not working, this was not allocated to her when she did find work temporarily, but she is entitled to it. 

This happened me one year. I was not working and my spouse was the assessable spouse for joint assessment. I got one months work. I did not have any tax credits, so paid tax on the whole lot at 41%. However, in the end of year, it was reassessed and I got all my tax back. 

Either Revenue have made a mistake in not allocating your wife her standard rate band for the year, or you have not understood the tax return. 

You will need to get so


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## podge3 (27 Apr 2010)

huskerdu said:


> Your wife has a standard rate band of 27K which that she cant transfer to you. Because she was not working, this was not allocated to her when she did find work temporarily, but she is entitled to it.


We are getting the Home Carers Allowance so she does not get any standard rate band allowance.


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## huskerdu (27 Apr 2010)

podge3 said:


> We are getting the Home Carers Allowance so she does not get any standard rate band allowance.



Apologies. I didn't know that.


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