BES tax calculation

R

rkd

Guest
Would someone clarify how I calculate tax in this situation. If I earn 100,000 gross as a self-employed contractor and I have 62,500 paid into a qualifying BES in 2007, what is my tax liability? Are my allowances/credits still useable? Can I offset against income tax up to the 34,000 threshold for 2007 as well as the higher rate?

From what I can tell my PRSI is 5% up to 100,100 and 5.5% thereafter.

One of the documents on Revenue.ie states that: Relief is given as a deduction from total income before tax credits and allowances.

Another that: Relief is given at the highest rate of income tax at which you are chargeable for the year of claim.
 
Your income tax will be calculated is if you only earned €37,500 per annum (€100k - 62.5k). You will be fully entitled to your normal credits.
 
Nige,

You sure I can claim the whole 62,500 in one year if marginal rate is 41%?

At what stage does PRSI get deducted?


Thanks!
 
Absolutely sure and I don't think you get any PRSI relief for your BES investment.
 
Cheers Nige!

Not to drag this out but I'm still lost as to *where* PRSI gets deducted...off gross before BES relief or off net of BES relief
or what?
 
Misunderstanding..I'm not talking about PRSI relief but PRSI to be paid!

[ On re-reading the answer above it just dawned on me that what you
meant by no PRSI relief is in the first equation below..doh!?? ]

Is it: 100K - (5% * 100K) - 62,500 BES - allowances/credits

or: (100K - 62,500) * 5% - allowances/credits

or something else?
 
extopia, that sorted all my questions -- thanks!


For forum info, at 100,000 in 2007 the final formula is:


(34,000*20% + (100,000 - BES amount - 34,000)*41%) - credits + 100,000*5%


* 5% PRSI up to 100,100 else 5.5%
* 34,000 threshold @ 20%
 
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