Bonus

S

Spoonhead

Guest
Hi Guys,

I just got a bonus of €1600 at work. I earn €25500 per Year. What should I expect to be paid in my payslip?

Does this bring me into the higher bracket?
 
You can earn €34k in 2007 at the standard 20% rate before hitting the top rate (more if you are married/have dependents etc etc)

So you should get 74% of the bonus [100 - 20% tax - 6% PRSI] all other things being equal, as your net payment

[Certain assumptions made due to lack of full facts]
 
Strangely enough I've just been discussing bonus payments with my daughter's friend! She earns 22k and received a bonus of 4K. The company deducted 42% of the bonus. When she approached HR about this, it was explained to her that a bonus is treated differently and that they are always charged at the higher rate! Never heard the likes in my life. Anyone any comments? Am I right or wrong in this instance?
 
liteweight said:
Never heard the likes in my life. Anyone any comments? Am I right or wrong in this instance?
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You must have missed a thread liteweight...

http://www.askaboutmoney.com/showthread.php?t=25039
This one explains it fairly well.

The SRCOP is spread evenly over the year. A bonus is paid in a single month so you can only use 1/12th of your SRCOP against the bonus + normal pay, meaning even though the yearly pay (+ bonus) is under the SRCOP, you can end up paying 42% that month.
 

In the following months, you should start getting some of the 41% tax back until at some stage later in the year, your tax has been rectified for that point in the year.
 
And if you do not recieve the tax back in the year just apply to revenue for a refund o fhte overpaid tax
 
Rhino 1 said:
And if you do not recieve the tax back in the year just apply to revenue for a refund o fhte overpaid tax
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The employer should facilitate returning it over each month (keeping all your individual monthly returns in order - and as detailed in the thread linked) but worst case scenario this would clear it up.

Just to be safe, given it's slightly out of the norm, be sure to request a P21 (balancing statement) at the end of the tax year to insure everything is in order.
 

But if the EE has only been paid total €26k in the year, the total earnings is still under the 42% bracket and should only be charged at 20% tax. The only way the bonus should be taxed at 42% is if the employee is on week 1 or emergency tax.
 
Thanks Satanta, I did miss that thread. I understand what you're saying but my thinking was along the same lines as MsGinger above. If the girl only earns 22k per annum then the bonus only brings her salary to 26k....still below the threshold of the higher rate of tax.

So I assume my thinking is flawed and that it's not tax credits I should be looking at but band widths? Basically I know you're right, just haven't copped on why yet! Slow day today...ah well I'm getting used to it!
 
She earns about €2K per month but because the calculations are done monthly, if she gets a once-off bonus of €4K, the system thinks that she earns €6K per month (€72K per annum) because that's what's coming through.
 
Liteweight, I understand where you're coming from.

While bands technically mean she will get the money back, by using credits and looking at it monthly they protect the person from having an underpaid tax liability at the end of the year should they have a change in conditions.

e.g. I earn 20k p/a. I get a 5k bonus. They tax me at 20% and give me the rest (going over my monthly tax allocation). Then I change job to one where I earn 50k. Come the end of the year I'll have underpaid tax. By looking at it monthly this won't (or shouldn't) happen.
 
liteweight said:
I get you Satanta, they took almost half of her Xmas bonus, but it was for her own good!
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Haha, not sure that's quite how I'd describe it, but the basic idea.

It's like savings without the interest, how kind of them.
 
Indeed, their generosity exceeds their many personal charms! Actually I find the taxman friendly these days so cancel that last remark!
 
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