Tommy is a manager at Centre Parcs Ireland and earns a gross annual salary of €85,000. His employer provides him with a company car worth €25,000. This is treated as income for tax... Tommy is a manager at Centre Parcs Ireland and earns a gross annual salary of €85,000. His employer provides him with a company car worth €25,000. This is treated as income for tax purposes and is taxed accordingly. Tommy's tax information is shown below. Calculate each of 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 Read more

Steps to Solve

1. Calculate Gross Income

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

2. Calculate PAYE (Pay As You Earn)

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

3. Calculate Total Tax Credits

Tommy has three tax credits: Single Person (€1,700), PAYE (€1,700), and Dependent Relative (€245). $$ \text{Total Tax Credits} = €1,700 + €1,700 + €245 = €3,645 $$

4. Calculate Net PAYE

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

5. Calculate USC (Universal Social Charge)

Tommy pays 0.5% on the first €12,012, 2% on the next €9,281, and 4.5% on the balance. $$ \text{USC}_1 = 0.005 \times €12,012 = €60.06 $$ $$ \text{USC}_2 = 0.02 \times €9,281 = €185.62 $$ To find the balance, subtract the first two bands from the gross income: $$ \text{Balance} = €110,000 - €12,012 - €9,281 = €88,707 $$ $$ \text{USC}_3 = 0.045 \times €88,707 = €3,991.815 $$ Total USC is: $$ \text{Total USC} = €60.06 + €185.62 + €3,991.815 = €4,237.495 \approx €4,237.50 $$

6. Calculate PRSI (Pay Related Social Insurance)

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

7. Calculate Annual Take-Home Pay

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