Calculate the following: (i) The PAYE which Tommy has to pay. (ii) The total amount of USC. (iii) The total amount of PRSI. (iv) Tommy's annual take-home pay.

Steps to Solve

1. Calculate Tommy's gross income

Tommy's gross income is his salary plus the value of the company car. $$ \text{Gross Income} = \text{Salary} + \text{Car Value} = €85,000 + €25,000 = €110,000 $$

2. Calculate the PAYE (Pay As You Earn) before tax credits

Tommy pays 20% on the first €40,000 and 40% on the balance. $$ \text{PAYE}_1 = 0.20 \times €40,000 = €8,000 $$ The balance of his income is: $$ \text{Balance} = €110,000 - €40,000 = €70,000 $$ $$ \text{PAYE}_2 = 0.40 \times €70,000 = €28,000 $$ $$ \text{Total PAYE before credits} = €8,000 + €28,000 = €36,000 $$

3. Calculate total tax credits

Tommy has a Single Person Tax Credit, a PAYE Tax Credit, and a Dependent Relative Tax Credit. $$ \text{Total Tax Credits} = €1,700 + €1,700 + €245 = €3,645 $$

4. Calculate the PAYE after tax credits

Subtract the total tax credits from the total PAYE before credits. $$ \text{PAYE} = €36,000 - €3,645 = €32,355 $$

5. Calculate the USC (Universal Social Charge)

USC is calculated in three bands: 0.5% up to €12,012, 2% on the next €9,281, and 4.5% on the balance. $$ \text{USC}_1 = 0.005 \times €12,012 = €60.06 $$ $$ \text{USC}_2 = 0.02 \times €9,281 = €185.62 $$ The balance of income is: $$ \text{Balance} = €110,000 - €12,012 - €9,281 = €88,707 $$ $$ \text{USC}_3 = 0.045 \times €88,707 = €3,991.815 \approx €3,991.82 $$ $$ \text{Total USC} = €60.06 + €185.62 + €3,991.82 = €4,237.50 $$

6. Calculate the PRSI (Pay Related Social Insurance)

PRSI is 4% of his gross income. $$ \text{PRSI} = 0.04 \times €110,000 = €4,400 $$

7. Calculate Tommy's annual take-home pay

Subtract the PAYE, USC, and PRSI from his gross income. $$ \text{Take-Home Pay} = \text{Gross Income} - \text{PAYE} - \text{USC} - \text{PRSI} $$ $$ \text{Take-Home Pay} = €110,000 - €32,355 - €4,237.50 - €4,400 = €69,007.50 $$