split salary for more efficient tax (for us!)

N

nichick

Guest
dunno if this is possible at all- perhaps only in an ideal world,
my husband and i both work for the same company, him fulltime earning approx 70k, i'm only parttime earning around 7k, i've sorted our credits etc in favour of him but could one get the accountants to split his so that i earn ~27k and get the most of the potential 20% tax rate, totally cheeky i know but in these recessionary time, i'm trying to think of anything to pay our stupid fixed rate mortgage that we in neg equity on -like many others!
anyone??
 
Well I dont know if it is, sounds like it would be.
 
Is it not the case where at the end of the year you opt for joint assessment then you get the benefit of twice the 20% band anyway?
 
callybags said:
Is it not the case where at the end of the year you opt for joint assessment then you get the benefit of twice the 20% band anyway?
Click to expand...

No. if one earns over the cut-off point for 20% and the other earns less then the 20% band is limited to the maximum of the cut-off point + the second income. E.G.
Earner 1 earns E 70,000
Earner 2 earns E 10,000

Max cut-off available to earner 1 is E 45,400
earner 2 can earn up to E 27,400 at 20%,

Max cut off is E45,400+E10,000.
 
Thanks for that Graham07.

I am a bit out of touch with personal tax these days.

Can two spouses ( married to each other, of course!) on high salaries opt for separate assessment and take advantage of the €45,400 thresho;d each?

Also, in a situation similar to the OP's,how would joint income be treated?
e.g. rental income on an investment property.
Is the income divided 50/50 and added to each spouses PAYE total to determine their total income?
 

In cases of sep asst it would be E36,400 each, cant get omre than E72,800 at 20% between spouses no matter what.

If you had rental income owned jointly then a 50/50 would be normal, that could allow some of any unused 20% on part of lower earning spouse be used.
 
Hi Nichick,

I have to say I have a lot of sympathy for you in this situation. I will deal with the issue in a minute but I have seen previously spouses who are directors of their own company effectively split their salary so that they can maximise the use of their tax bands at 20%. Unfortunately from my reading of the above you are not in a position to take this course of action.

You (and many others) are being discriminated in my opinion by the Minister for Finance. As I recall the concept of individualisation was introduced back in the late 90's/early noughties by Charlie McGreevy to encourage young mothers back into the work force at a time when we were nearly coming into full employment in this country. This was very controversial at the time and meant that one income families entered the higher rate of tax at a much earlier point than dual income families.

As we are all aware things have changed substantially in the interim and with many people losing their jobs (projected to be 500,000 people by the end of the year on Q and A last night) this concept is now outdated.

To give a quick example of how it affects Nichick and her spouse above is as follows. As it stands under current rules this couple will pay approx PAYE of €13,246 in 2009. (€70,000 - €45,400) x 41% + €45,400 x 20% + €7,000 x 20% - credits of €7,320.

If genuine joint assessment were to apply they would pay approx PAYE of €8,962. €77,000 - €72,800 x 41% + €72,800 x 20% - credits of €7,320.

Please note I have ignored income levies/health levies and PRSI to keep the calculation as simple as possible. Quick calcs so I hope they are correct! Anyway my point is that the couples liability is €4,284 (€13,246 - €8,962) higher as a consequence of this individualisation concept.

I believe this concept is very unjust on families particularly in the current climate. Anyone else have opinion on this?
 
Yes I agree the current system is anti family. The single income household hits the higher rate of tax far too early.

One spouse is supporting 4 people or more from a single income and being heavily taxed. This totally diminishes the value of the homemaker
 
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