Tax Credits – Are you throwing money away?Posted Wednesday, January 23, 2019
By Jimmy Sheehan, Commercial Director, Contracting PLUS
It’s very seldom we hear of the Revenue Commissioners making a mistake that actually has you in a position of paying less tax than you should. In fact, if it ever did happen, my advice would be to pop out and do a quick-pick in the next Euro-millions draw because you’re either on a run of good luck, or you’ll need the winnings to pay back the Revenue when they realise their error.
PAYE modernisation (I know, we’re all sick of this phrase but stick with me for a little bit) brought new changes to the tax system. Contractors are paid through their limited company in the same way employees are paid by an employer, so the new rules directly affect self-employed individuals operating through a limited company, whether it’s your own limited company or an umbrella company.
There used to be a little bit of flexibility over assigning tax credits where it was known that the ones supplied by the Revenue Commissioners were incorrect. However, those days are gone. You, and only you, can make Revenue aware of changes which may affect the amount of tax credits you are entitled to.
I’ve set out 4 quick steps below to make sure you’re sorted but before we get to these let’s take a quick look at some of the phrases you’ll need to know…
The lingo (so you’ll know what I’m talking about further down the page)
This stands for Revenue Payroll Notification. This essentially is the new term for the old Tax Credit Certificate.
Earnings & Deduction Certificate
You’ll no longer get a P60 at the end of the year, or a P45 if you leave a job during a year
This is the name of the Revenue Commissioners online portal where you can directly view and amend your tax credits. You can review your tax affairs and apply for certain tax reliefs and incentives. If you’re not already registered you can set up your account here.
You get a number of tax credits which are essentially a tax deduction. For example, PAYE workers receive an annual tax credit of €1650. This means that you get a deduction of €137.50 off your tax bill each month. This is automatically applied – there’s nothing you need to do. Self-employed company directors (the majority of contractors) don’t get the PAYE tax credit. You get the Earned Income Tax Credit of €1,350 (or €112.50 per month).
Standard Rate Cut Off Point
This is the amount of money you earn at the 20% income tax rate. Anything earned over this amount is taxed at 40% Income Tax.
What to do…4 simple steps
1. Set Up MyAccount on Revenue.ie
Login to MyAccount and make sure you have the correct tax credits. Once you’re registered you’ll be able to see a list of all your ‘employments’. If you have more than one source of PAYE income, they will all be listed in MyAccount.
2. Check your Tax Credits are correct
The majority of people have the same Tax Credits and Standard Rate Cut-off Points so here’s a quick reminder of the more popular ones;
Tax Credits 2019
Single Tax Credit €1,650
Married Tax Credit €3,300
PAYE Tax Credit (non-self-employed) €1,650
Earned Income Tax Credit (self-employed) €1,350
Standard Rate Cut-off points 2019
Single Person €35,300
Married Couple (1 income) €44,300
Some people might also have additional tax credits and these will be shown in MyAccount. More information on tax credits can be found here.
3. Compare your payslip and the figures in MyAccount
There may well be a few teething issues so be prepared. If you think there are issues, don’t panic. Flag them to your Dedicated Account Manager and they’ll sort them out straight away.
This is the biggest change to the PAYE system since it was first introduced in 1960. You might notice the figures located in different places, but if the RPN details used for the payroll are the same as those recorded in Revenue then there won’t be an issue. (Remember, the company has to use the RPN figures as failure to do so will lead to a €4,000 fine for them).
4. Call Us
If you’re anyway unsure, confused, or have any type of question in relation to your pay, give your Dedicated Account Manager a call on 021 4839 339.
A few of the more popular questions answered briefly
- You can still claim business expenses.
- You won’t lose out. If you pay less tax in January because of wrong information held by Revenue, we’ll help you get it fixed and then you’ll be reimbursed in your February pay.
- If you’re married, get your spouse to check their tax credits as well to make sure you are not over/under paying tax as a family unit.
Remember, regardless of what tax credits you have, when you’re with Contracting PLUS, your Dedicated Account Manager works closely with you to understand your expenses and make sure you’re not paying more tax than you need to. Call us today if you have any more questions, we love ‘Making Contracting Simple’! 1800 5454 22