Over our time working with businesses and employers we have developed a simple ready reckoner showing for different levels of income when the various taxes and charges kick in. Don’t be fooled by a headline income tax rate of 20%. The basic rate for most incomes is at least 31% with PRSI and USC and the top marginal rate of 52% is set at a very modest income level. This is a confusing area for lay people but the following milestones can be useful for financial planning for employers and employees of all types

Top Tier – Mid €60k’s

€65600 is the magic number for a married couple who are both working. Every cent after this is more or less at the marginal rate of 52% so is painfully easy to calculate.  Yes it is penal that the top rates kick in so early. This level of income means you are getting around €4400k net into the house to play with every month.

Househusband – Under €42k.

€41,800 is the maximum before 53% kicks in for a couple where only one spouse is in employment. Only €9k of the spouses cut off income portion is transferrable so there is certainly a tax sweet spot for a spouse to go out and earn €23k at 20% and claim his PAYE credit.

Singleton – Under €33k.

€32,800 is the highest income a single person can earn at the low rate of 31% before falling over the top rate cliff. To put it into perspective this is about €2200 net per month i.e. half the married couple who are both working

Minimum Mix-up – Around €18k

There is a weird €4 minimum wage twilight zone between €352 and €356 per week where the PRSI system goes into overdrive. The high rates for employers and employees kick in here which means that care should be taken in setting salaries at this level.  

To illustrate by an extreme example

Silly Limited gives John a pay rise from €352 per week to €357 per week as he is working hard. This will actually give him a decrease in net pay by over €550 over the year because all of his pay is now subject to PRSI at 4% where previously none of it was. To add to this ABC will now have to up the Employers PRSI from 8.25 % 10.75% meaning an extra €450 in the year.

Free and easy – Around €16k

As this is below the minimum wage it would only apply to part-time work or self employed people say who don’t take a full salary. €16016 is when the top rate of USC at 7% kicks in and €16500 is about as much as you can earn in employment for a single person without paying income tax or a proprietary director whose spouse is not working.

If you need help with fixing pay levels for employees or for the boss and have difficulty getting around these numbers then give us a call at 01 450705 or email [email protected]