# Paye and self employed in the same year



## Amygdala (14 Sep 2016)

My wifes short term contract ended in June. During this time she was a PAYE worker and earned approx €7000- part time.
Recently, she has started out as self employed. She earns approximately €150-200 per month.

We are assessed jointly. I am a PAYE worker full time. The tax credits and rate bands have remained with my income.

What will her approximate tax liability be for 2016? And how does one calculate it?

Thank you in advance


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## Black Sheep (14 Sep 2016)

On the above figures, Tax liability = NIL.

Part time contract    -      -            €7000
Say 5 months @ €200 per month - €1000
Total                                                    €8000 @20% = €1600

PAYE credit                                                                  (€1600) 

Bal due NIL


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## T McGibney (14 Sep 2016)

Black Sheep said:


> On the above figures, Tax liability = NIL.
> 
> Part time contract    -      -            €7000
> Say 5 months @ €200 per month - €1000
> ...


PAYE credit doesnt extend to self-employment income.


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## Gordon Gekko (14 Sep 2016)

T McGibney said:


> PAYE credit doesnt extend to self-employment income.



But she had PAYE income as well as self-employed income?

Is it restricted to covering the €7,000 only?


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## Black Sheep (14 Sep 2016)

Ooops! You're right of course. Apologies to OP


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## Amygdala (16 Sep 2016)

Thank you all for your replies. 
I have been trying to do some research on this.
My understanding is that with the introduction of the self-employed tax credit of €550 there is some interaction between PAYE and self-employed, from citzensinformation.ie "...However, if you also qualify for the PAYE *tax credit*, the combined value of these 2 *tax credits* cannot exceed €1,650".
Also,she will need to register for VAT if turnover exceed €37,500 if working in service sector. I presume turnover is gross income and not profit. 

She will need to file preliminary tax returns before 31st Oct of the same year, is this Form 11?

Am I missing anything else?
Thank you in advance.


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## Daenis (16 Sep 2016)

if she hasn't gone ahead and registered for self assessment already then the self employment income can simply be declared on a form 12 or e-form 12 as her non-paye income is below 3174.


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## Amygdala (17 Sep 2016)

Thank you Daenis.
My wife is unlikely to secure PAYE employment next year and will focus on developing her self-employment income in the next tax year. This will need to be balanced with childcare costs and Tax liabilities.

Above you have mentioned €3,174, this is the cut-off for the definition of a "Chargeable Person". Which I presume means that any net income above this must be declared for self-assessment. 

What I am trying to find out are threshold levels , ie- for PRSI a self employed person earning €4999 pays no PRSI, however if they earn €5000- they now pay €500. In this scenario, there would be no point in accepting a extra hour off work just to pay €500 in PRSI. 

I am trying to calculate the minimum amount she would need to earn to make a net profit (inc tax and PRSI) and be efficient from childcare and travel cost point of view. 
We have joint accounts and are assessed jointly. I am assessed at the higher rate. Therefore we see our earning as a household income.
Basically, for every euro my wife earns will this be assessed at the higher rate less the Earned Income Tax Credit of up to €550. 

Is there a more efficient way for tax assessment- ie To be assessed separately etc?

Thank you again for all your replies.

(As an aside and not to go off topic, I am astonished at the discrepancy in the treatment of the self-employed to PAYE workers. I have only explored low income scenarios. Not sure if this applies to high incomes as well.)


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## Joe_90 (17 Sep 2016)

Amygdala said:


> . In this scenario, there would be no point in accepting a extra hour off work just to pay €500 in PRSI.



There certainly is worth it if she wants to get a pension at age 65+ we have clients who will get a state pension with 10 x €500!!!

Your wife can earn up to €24,800 at the standard rate before the higher rate kicks in.

Not sure what you comments on PAYE are in relation to.  The fundamental difference is the tax credit where PAYE workers get a PAYE tax credit of €1,650 self employed people get the earned income credit of €550.

 PAYE workers get Schedule E expenses depending on the type of job that they do.  Self employed people are allowed to deduct expenses which are related to their trade.  

PAYE workers have tax deducted from the income before they receive it.  Self employed people file a tax return under a self assessment system declaring their profit for the year.


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## Amygdala (17 Sep 2016)

Thank you Joe_90 for your comments especially regarding PRSI and state pension. 
I had forgotten that €24,800 of SRCOP is not transferable. 
So in summary-
My Wife will be able to earn up €24,800 taxed at 20%, above this at the higher rate. This tax bill will be reduced by €1650 (individual tax credit) + 550 (earned income credit).
PRSI kicks in at €5000. Home carers credit is reduced after earning exceeds €7200. 
Are there any other factors that need to be considered for low-income self-employed spouses?


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## Deauville (25 Sep 2016)

Hi All,
May I ask a question on the subject?
I have helped my father in law and my daughter to register for PAYE Anytime (MyAccount).
The e12 Form did not have a facility to declare other income nor was there an option to fill out a Med 1.
Is this normal ?
The other income in both cases was well below 3,000.
Can anyone throw any light on this ?
Many thanks.


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