# Bonus paid - wondering about the tax rate applied



## LostinPhilly1 (27 Jan 2021)

Hi all,

I recently got a bonus of €1,310 at work. My base salary is €48,000. My salary was paid out 20/01 and the bonus is getting paid out separately tomorrow.

For the base salary, the following deductions are normally applied:
Income Tax: €751
USC: €127
PRSI: €52.42

For the bonus paid separately, the following deductions were applied:
*Income Tax: €524.15*
USC: 58.97
PSRI: €52.42

I find it a bit strange that the income tax applied on the bonus payment is almost the same amount as the one applied on my monthly base salary. Whilst I had expected deductions from the bonus itself having already received bonuses before, having it slashed by close to 50% in taxes seems a bit high to me especially for such a small bonus.

Can anyone have a quick look at the above and advise?

Thanks!


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## Sunny (27 Jan 2021)

You have used your month's tax credits on your normal salary. Your will be paying 40% tax on all of the bonus. There is no difference to overall tax amount if salary and bonus were paid on the same day. It's just depressing to see.....


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## LostinPhilly1 (27 Jan 2021)

Sunny said:


> You have used your month's tax credits on your normal salary. Your will be paying 40% tax on all of the bonus. There is no difference to overall tax amount if salary and bonus were paid on the same day. It's just depressing to see.....



I see. Thank you.
That's very depressing and a bit of a rip off if you ask me. It's especially blatant if the bonus is paid separately.


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## jpd (27 Jan 2021)

How is that a rip-off?

Your employer just applied the tax laws as voted by the Dail
If you think taxes are too high, then vote a party that will lower taxes and consequently, any public services that are funded by taxes


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## Protocol (27 Jan 2021)

Any extra income earned by anybody is taxed at the person's marginal tax rate.

There are three marginal tax rates in Ireland: 0%, 20%, 40%.

Once a single person reaches 35,300, the MTR is 40%.

The entry point to the top MTR is very low in Ireland, very low.


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## LostinPhilly1 (27 Jan 2021)

jpd said:


> How is that a rip-off?
> 
> Your employer just applied the tax laws as voted by the Dail
> If you think taxes are too high, then vote a party that will lower taxes and consequently, any public services that are funded by taxes



OK, it's a personal opinion. I'm not here to dive into a political tangent.


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## LostinPhilly1 (27 Jan 2021)

Protocol said:


> Any extra income earned by anybody is taxed at the person's marginal tax rate.
> 
> There are three marginal tax rates in Ireland: 0%, 20%, 40%.
> 
> ...



Thank you. I can see that indeed!


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## Coldwarrior (27 Jan 2021)

Protocol said:


> Once a single person reaches 35,300, the MTR is 40%.



Plus PRSI and USC so in effect its 48.5% or 52% if you earn over 70k.


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## Purple (27 Jan 2021)

LostinPhilly1 said:


> OK, it's a personal opinion. I'm not here to dive into a political tangent.


Congratulations; you are now one of "the rich".


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## Purple (27 Jan 2021)

jpd said:


> vote a party that will lower taxes and consequently, any public services that are funded by taxes


 Yea, no, that's not how it works. Can't let that one stand unchallenged. Nearly half the workforce pays no income tax but all income at or above the average industrial wage has deductions of over 50%. That's the problem, not some nonsense implication that a broader and more balanced tax base will damage public services.


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## barbaros (29 Jan 2021)

You pay 52% tax on bonus, if it's reflected to your payslip as "bonus". Happened to me once. Practically, government took bigger cut than me for my bonus.


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## Familyman77 (29 Jan 2021)

Would your employer pay into an executive pension instead of having to take it through payroll.  Something to ponder for again


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## MugsGame (29 Jan 2021)

barbaros said:


> You pay 52% tax on bonus, if it's reflected to your payslip as "bonus". Happened to me once. Practically, government took bigger cut than me for my bonus.



Eh no, it's nothing to do with how the employer has flagged it. All additional income is taxed at marginal rate, as others have said in this thread. There are no special taxes on bonuses (except for employees of state-supported banks earning a bonus of more than €20,000, who, between tax and USC, pay about 90% on the full amount.).



Familyman77 said:


> Would your employer pay into an executive pension instead of having to take it through payroll.  Something to ponder for again



Need to be careful it's not seen as salary sacrifice for tax avoidance.

But this is a good point for OP. You can make AVCs to a pension and get 40% of it back in income tax relief (subject to certain age and income related limits).


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## Thirsty (29 Jan 2021)

It's worth checking if your employer has an APSS scheme available - you have to wait three years, but at the end of that time your bonus is paid out tax free.

Failing that I would go the AVC route; build up a nice lump sum for your future self.


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## barbaros (29 Jan 2021)

MugsGame said:


> Eh no, it's nothing to do with how the employer has flagged it. All additional income is taxed at marginal rate, as others have said in this thread. There are no special taxes on bonuses (except for employees of state-supported banks earning a bonus of more than €20,000, who, between tax and USC, pay about 90% on the full amount.).



That's not (shouldn't be) an additional income. I am not getting payment from a different company, I am getting payment related my full time job. If it was included to my monthly salary, I would pay %40 tax on it (because of bracket) but because it was added as "bonus" I got taxed 52% for it.


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## _OkGo_ (29 Jan 2021)

barbaros said:


> That's not (shouldn't be) an additional income. I am not getting payment from a different company, I am getting payment related my full time job. If it was included to my monthly salary, I would pay %40 tax on it (because of bracket) but because it was added as "bonus" I got taxed 52% for it.



That is just completely wrong. Your basic salary is obviously above the €35.3k 40% tax band. Any additional/extra income, whether that be bonus, overtime or anything else will be at your marginal rate of 40% plus USC and PRSI so somewhere between 48-52%. Additional does not mean from a different source, it is just any income that is not your regular salary.


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## barbaros (29 Jan 2021)

Apologies, so eventually I paid 52% tax on my bonus because of being 40% tax band (eg. im rich), so even my explanation is wrong the conclusion is right?


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## Monbretia (29 Jan 2021)

Your annual tax credits are divided up either weekly or monthly and go against your usual salary tax charged, if there is an additional amount of income from whatever source then there is no extra weekly or monthly tax credit to offset against it as it's been used up on your regular income therefore you end up paying tax on the full amount of the extra payment without any credit to make it lower like there is with your ordinary salary.

You pay tax on every penny you earn (more or less) but there are tax credits to offset against this amount charged every pay period, once you exceed the tax credit amount for that period then it's straight tax out of the extra with no reduction for credits.


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## MugsGame (29 Jan 2021)

> the conclusion is right?


Your effective tax rate on the bonus income was 52%, but not because it was flagged as a bonus. A permanent monthly pay rise of that amount would have been taxed in exactly the same way.


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## _OkGo_ (29 Jan 2021)

barbaros said:


> Apologies, so eventually I paid 52% tax on my bonus because of being 40% tax band (eg. im rich), so even my explanation is wrong the conclusion is right?



Yes, basically you are rich  On the off chance that there was an error in your payroll, you should log on to your revenue account and complete your Income Tax Return and get your P21 balancing statements for the last 4 years. You might be pleasantly surprised to see you have not claimed all of your tax credits or that you have indeed overpaid IT, USC or PRSI. It can easily happen particularly if moving between companies. Any refund due will feel like a 100% tax free bonus


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## LostinPhilly1 (29 Jan 2021)

Basically, if you're married with kids, you're doomed because your expenses skyrocket and kill your disposable income. If you're single with no kids, the taxman thinks you're rich enough to pay inflated tax rates. You can't win.

I still think it is a rip off, I'm sorry. Whilst I'm incredibly grateful for a bonus during these times, the tax rate applied is just appalling. My bonus was €1,310 and €652 landed on my account. That's more than 40%.

As much as I love Ireland, what is exactly we're getting from these high taxes aside from contributing to the greater community?

Also, somebody explain to me but each time I got to the dentist or get an eye-test, I'm told I don't quality for that one free PSRI consultation when I've been paying my taxes in the country since I finished college 5 years ago. I always have to pay full-price. I don't see any return on these taxes at all. Ireland is not the worst by any means, but I can see a strong imbalance between what we pay & what we get in return.

That said, I was offered a €55k job in Belgium last year and the net monthly income was roughly €2.3k. That's far worse.

I think I'll wind up moving to Dubai or some place at this rate. Cost of living might be very expensive, but I'm taking the tax-free aspect.


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## Coldwarrior (29 Jan 2021)

LostinPhilly1 said:


> That's more than 40%


Yes, it is. Have you read the replies in this thread?


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## Protocol (29 Jan 2021)

LostinPhilly1 said:


> Also, somebody explain to me but each time I got to the dentist or get an eye-test, I'm told I don't quality for that one free PSRI consultation when I've been paying my taxes in the country since I finished college 5 years ago. I always have to pay full-price. I don't see any return on these taxes at all. Ireland is not the worst by any means, but I can see a strong imbalance between what we pay & what we get in return.








						Treatment Benefit Scheme
					

The Treatment Benefit Scheme is a scheme run by the Department of Social Protection that helps pay for dental, optical and aural services for people with the required number of PRSI contributions.




					www.citizensinformation.ie
				





*Contribution conditions*
You must have paid Class A, E, P, H or S social insurance contributions.

The amount of social insurance you need depends on your age.

*(2) Aged 21-24*

Between these ages you may qualify if you have paid at least 39 contributions _and_


At least 39 paid or credited in the governing contribution year (2016 is the governing contribution year for claims made in 2018) *or*
26 paid contributions in each of the second and third last contribution years. For claims made in 2018, the second last contribution year is 2016 and the third last contribution year is 2015.
*(3) Aged 25-65*

From the age of 25 onwards, you must have at least 260 paid contributions _and_


At least 39 paid or credited contributions in the governing contribution year (2016 is the governing contribution year for claims made in 2018) *or*
26 paid contributions in each of the second and third last contribution years. For claims made in 2018, the second last contribution year is 2016 and the third last contribution year is 2015.


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## Autofill (29 Jan 2021)

An employer can give an employee a voucher up to the value of €500 once per year. If you had taken the bonus as1 €500 voucher last week of December and another one first week of January together with €310 cash you would only have paid €150 tax.


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## LostinPhilly1 (29 Jan 2021)

Autofill said:


> An employer can give an employee a voucher up to the value of €500 once per year. If you had taken the bonus as1 €500 voucher last week of December and another one first week of January together with €310 cash you would only have paid €150 tax.



This is not how my employer operates.


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## Autofill (29 Jan 2021)

LostinPhilly1 said:


> This is not how my employer operates.


That’s fair enough, a lot of companies give vouchers now as bonus as they are tax free.


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## Zenith63 (30 Jan 2021)

LostinPhilly1 said:


> I still think it is a rip off, I'm sorry. Whilst I'm incredibly grateful for a bonus during these times, the tax rate applied is just appalling. My bonus was €1,310 and €652 landed on my account. That's more than 40%.
> 
> As much as I love Ireland, what is exactly we're getting from these high taxes aside from contributing to the greater community?
> 
> ...


The tax wedge levied in Ireland really isn’t that big, in fact slightly below the OECD average http://www.oecd.org/ctp/tax-policy/taxing-wages-ireland.pdf.  You're paying 26% on your €49k salary, what rate do you think it should be?

So what your fairly average amount of tax paid gets you is street lighting, road repairs, a functioning democracy, a legal system that enforces rights for women, fresh water, parks, public pension, free healthcare, social insurance to protect the poorer in society, fire service.... need I go on?

And yes there are many countries like Dubai where you can avoid having these privileges and pay less tax. The spectrum runs right down to various unfortunate African countries that levy no taxes and provide no centralised services.


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## fidelcastro (30 Jan 2021)

LostinPhilly1 said:


> Basically, if you're married with kids, you're doomed because your expenses skyrocket and kill your disposable income. If you're single with no kids, the taxman thinks you're rich enough to pay inflated tax rates. You can't win.
> 
> I still think it is a rip off, I'm sorry. Whilst I'm incredibly grateful for a bonus during these times, the tax rate applied is just appalling. My bonus was €1,310 and €652 landed on my account. That's more than 40%.
> 
> ...


Old news I'm afraid.
PAYE Tax has been this high  and higher up to 65% since 1970s. .
Pressume you availed of near free school and substantially reduced college course.. Like walking on lit footpaths in a secure location. All costs. 
How about how to pay the front line staff staff, looking after your friends and  relations during covid. Covid payments to those without jobs ring a bell?
All has to be paid.
Re Dubai, if your female I would give these slave labour places a wide berth. As a female you are viewed as a man's possessions like furniture. Stick to places which respect human rights rather than fumbling in the greasy till....
F.


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## peemac (30 Jan 2021)

Protocol said:


> Any extra income earned by anybody is taxed at the person's marginal tax rate.
> 
> There are three marginal tax rates in Ireland: 0%, 20%, 40%.
> 
> ...


Entry point to start paying tax is very high too.

But a certain party calls foul if someone earning €40k pays low rate on everything.

I personally think that there should be a 30% middle rate to 50k, combined with a lower entry point to paying tax


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## barbaros (1 Feb 2021)

Nah I have a better idea, just decrease the tax bracket for 40%. Instead of 35.3k limit (for singles) decrease it to 25k. Then most of the people will be aware of how excessive are the taxes. Most of the people are on 20% so not even aware of 40%. But no party will do that as it means they won't get votes next time.


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## jpd (1 Feb 2021)

I'd vote for any party that promises to reduce taxes and increase spending, if only there was one - No, wait there is!


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## Purple (1 Feb 2021)

Zenith63 said:


> The tax wedge levied in Ireland really isn’t that big, in fact slightly below the OECD average http://www.oecd.org/ctp/tax-policy/taxing-wages-ireland.pdf.  You're paying 26% on your €49k salary, what rate do you think it should be?
> 
> So what your fairly average amount of tax paid gets you is street lighting, road repairs, a functioning democracy, a legal system that enforces rights for women, fresh water, parks, public pension, free healthcare, social insurance to protect the poorer in society, fire service.... need I go on?
> 
> And yes there are many countries like Dubai where you can avoid having these privileges and pay less tax. The spectrum runs right down to various unfortunate African countries that levy no taxes and provide no centralised services.


The problem is that the tax base is too narrow. I went onto the highest tax band as a third year apprentice in the early 90's when working about 60 pay hours a week. The same apprentice now pays no tax (although they are not allowed to work lots of overtime).
The highest tax band should not kick in until you are earning at least 1.5 times the average industrial wage and the lowest tax band should start at about €12k. The Universal Social Charge should be a Universal Social Charge... of else change the name to the Selective Social Charge. 
It should be remembered that most people on the minimum wage are young and live in middle income households. We have FIS and other Welfare programs to help families on low incomes.


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## barbaros (2 Feb 2021)

Zenith63 said:


> So what your fairly average amount of tax paid gets you is street lighting, road repairs, a functioning democracy, a legal system that enforces rights for women, fresh water, parks, public pension, free healthcare, social insurance to protect the poorer in society, fire service.... need I go on?



I will pick only one thing out of the list, and that's what I only care about: free healthcare. Good luck with that, that thing doesn't exist. I can't go to GP without paying (€60 atm) because I am not considered poor enough, I am not entitled to medical card, and besided I saw how my GP brushed off someone came in with medical card saying "sorry we don't have any free slots for medical card holders atm". And even more funny thing? When your GP asks you: would you like to go public or private? If you go public, it might take few months, in private it will take few days. That's what literally I have been told. And yeah I know a person that got a mail from public hospital saying: "Hello it's been a year, we were wondering if you are still interested with getting appointment from us".  

Like I said, I just expect a better healthcare system with my paid taxes, and that thing does *not* exist in Ireland. Instead of waiting for 1 year for an appointment it's more affordable to go to A&E, pay €100 and get yourself checked. Because if you go to GP, then you pay, and if GP thinks you need to see specialist, then you either wait for a year, or pay more (around €100) to get yourself checked.


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## Zenith63 (2 Feb 2021)

barbaros said:


> I will pick only one thing out of the list, and that's what I only care about: free healthcare. Good luck with that, that thing doesn't exist. I can't go to GP without paying (€60 atm) because I am not considered poor enough, I am not entitled to medical card, and besided I saw how my GP brushed off someone came in with medical card saying "sorry we don't have any free slots for medical card holders atm". And even more funny thing? When your GP asks you: would you like to go public or private? If you go public, it might take few months, in private it will take few days. That's what literally I have been told. And yeah I know a person that got a mail from public hospital saying: "Hello it's been a year, we were wondering if you are still interested with getting appointment from us".
> 
> Like I said, I just expect a better healthcare system with my paid taxes, and that thing does *not* exist in Ireland. Instead of waiting for 1 year for an appointment it's more affordable to go to A&E, pay €100 and get yourself checked. Because if you go to GP, then you pay, and if GP thinks you need to see specialist, then you either wait for a year, or pay more (around €100) to get yourself checked.


The length of the list was really the point I was trying to make.  You're right to say "free healthcare" was sloppy wording on my part.


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## Purple (2 Feb 2021)

barbaros said:


> I will pick only one thing out of the list, and that's what I only care about: free healthcare. Good luck with that, that thing doesn't exist. I can't go to GP without paying (€60 atm) because I am not considered poor enough, I am not entitled to medical card, and besided I saw how my GP brushed off someone came in with medical card saying "sorry we don't have any free slots for medical card holders atm". And even more funny thing? When your GP asks you: would you like to go public or private? If you go public, it might take few months, in private it will take few days. That's what literally I have been told. And yeah I know a person that got a mail from public hospital saying: "Hello it's been a year, we were wondering if you are still interested with getting appointment from us".
> 
> Like I said, I just expect a better healthcare system with my paid taxes, and that thing does *not* exist in Ireland. Instead of waiting for 1 year for an appointment it's more affordable to go to A&E, pay €100 and get yourself checked. Because if you go to GP, then you pay, and if GP thinks you need to see specialist, then you either wait for a year, or pay more (around €100) to get yourself checked.


The problem there isn't taxes or funding; we spend more than enough on out Public Healthcare system. The problem is organisational incompetence and the massive waste that goes with it as well as the vested interest groups within the system that prevent change.


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## barbaros (2 Feb 2021)

Sorry, I don't agree with spending more than enough on Public Healthcare system. According to whereyourmoneygoes.gov.ie/en/
Health should have more spendings than social protection.


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## Purple (2 Feb 2021)

barbaros said:


> Sorry, I don't agree with spending more than enough on Public Healthcare system. According to whereyourmoneygoes.gov.ie/en/
> Health should have more spendings than social protection.


We are in the top 10 to 15 countries in the world for per capita spending on healthcare (Purchasing Power Parity adjusted) and have one of the youngest populations in the developed world. We spend 20% more than the EU average. Note that Private Health Insurance spending is 3 times the EU average. This acts as a direct and indirect subsidy of the Public System while simultaneously creating inequality of access. Read the key finding from this report for details. We spend enough, we just waste loads of it.


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## abc_xyz (4 Feb 2021)

Reading the key findings from that report I'd get the successes the health system achieves are in spite of itself.

The good:
"life expectancy in Ireland has increased more rapidly than in nearly all EU countries since 2000 ... more than one year above EU average"
"generally effective in avoiding deaths from preventable causes"

The bad:
"but not all additional years are lived in good health"
"spends around one-fifth more on health per capita than the EU average"
"Ireland has largest market for duplicate insurance in the world"
"only western European country without universal access to primary care"
"low levels of hospital capacity" - really evident with covid
"inappropriate usage of some hospital resources" - I think this refers to keeping (older) patients in hospital because there is no where for them to go
"serious questions about coherence between education, training and employment policies of doctors"


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